Back in October, the Biden administration announced executive actions that were designed to bring student loans closer to forgiveness. Part of this change was credit toward the PSLF (Public Service Loan Forgiveness) program. However, issues tracking payments with these plans have led to many former students paying off their debts for longer than intended. In addition, a period of wait as those with loans await the Supreme Court ruling has led to uncertainty about the future. Whether these temporary and permanent changes will hold up and be implemented is unclear. Here is a guide to student loans and loan forgiveness in the meantime.
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How Does PSLF Work?
Once you have made 120 monthly payments, the PSLF program forgives the remaining balance of the student loan. To qualify for PSLF, you must be employed by the government or a non-profit organization, be working full time, have Direct Loans, and be using an income-driven repayment plan to repay your loans.
What Is The Fresh Start Program?
Those who are unable to keep up with their monthly loan payments often face confiscated tax refunds and social security benefits, among other forms of collection. The aim of the Fresh Start program is to clear the default status for these people and arrange a new repayment method without collection fees. This applies to Direct Loans, Federal Family Education Loans and Ed-owned Perkins Loans. It does not apply to private student loans.
What Is The Current State Of Affairs?
Applications have been halted on the loan forgiveness program, but before the pause, the program saw over 25 million people apply for relief. The executive actions are banking on the Heroes Act of 2003, which allows debt forgiveness for those who have experienced financial hardship as a result of a national emergency. As a result, the administration argues that they have the authority to enact these changes in the wake of the Covid-19 pandemic.
The Supreme Court will be hearing two cases, one of which involves an argument that some borrowers were unfairly excluded from the program, and the other which challenges the authority of the administration to enact the executive order in this situation. If the cases are dismissed, the loan forgiveness program will be upheld, but if they rule in favour of either plaintiff, the plan will be halted. Decisions are expected to be released in June or July.
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