Let’s begin with a reminder: The Biden/Harris Administration’s proposed $10,000 and $20,000 lump-sum forgiveness plan is completely separate from Public Service Loan Forgiveness (PSLF). The lump-sum proposal will be heard by the U.S. Supreme Court in February. No matter what the court decides, PSLF will still be available.
When Will Federal Student Loan Payments Restart?
The moratorium on federal student loan payments, which has been extended several times since the pandemic began, will be affected by the Supreme Court’s decision. As of this writing, no one can tell you precisely when payments will resume. Here’s what we know:
- If the Supreme Court rules on President Biden’s plan before June 30, payments will resume 60 days after the court’s decision.
- If the Supreme Court hasn’t issued its decision by June 30, borrowers will likely need to start repaying loans 60 days after June 30. There is also the possibility that the moratorium will be extended at that point, but that’s not something to bank on. Assume that payments will resume and prepare your budget accordingly. If you need help, Cambridge Credit Counseling will be happy to review your options.
A New Payment Adjustment Opportunity is Available: Deadline May 1.
The PSLF Waiver ended on October 31, 2022, and it looks like nearly 500,000 non-profit workers took advantage of the opportunity to apply. By August, more than $14 billion in PSLF relief had been approved, and, whenever MOHELA can make its way through the mountain of applications it received after taking over administration of the program, additional relief will be granted. (If you applied in August or later and are still waiting to hear from MOHELA, be patient. They are overwhelmed.) Despite our best efforts to inform members about your options during the waiver period, some of you may have missed the opportunity. If so, you may have another chance.
Public service workers, including teachers, paraprofessionals, school counselor, nurses, librarians, state and municipal workers, etc., will have another opportunity to have their payment count increased under a one-time account adjustment announced by the U.S. Department of Education. Borrowers with Direct Loans will be provided with many of the same benefits that were available under the limited PSLF waiver. Borrowers who have commercially held FFEL loans (or other non-Direct loans) can consolidate and receive credit toward PSLF for prior payments as part of this one-time account adjustment, as long as they submit a consolidation application by May 1, 2023.
Borrowers with Direct loans do not need to apply for this credit; it will be automatically computed by the Department of Ed. Borrowers who do not have eligible loans will need to apply for consolidation no later than May 1, 2023, in order to benefit from the one-time account adjustment. To consolidate your FFEL loans into a Direct loan, simply apply at studentaid.gov.
To learn more about this opportunity and how to prepare your budget for the resumption of student loan payments, we encourage you to participate in one of our free webinars, conducted by our partner, Cambridge Credit Counseling.