I have student debt: What to know after Supreme Court strikes down loan forgiveness (2024)

The Supreme Court has ruled against President Joe Biden's plan to wipe out student loan debt for tens of millions of Americans.

The decision means the 43 million federal loan borrowers who were eligible for relief will need to prepare for student loan payments to resume in the coming weeks. About 45 million Americans have student loans, collectively worth $1.75 trillion.

Had Biden’s plan passed, the federal government would have canceled $10,000 in federal student loans, including Parent Plus loans, for those earning less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would have seen an additional $10,000 in debt forgiven.

For those with student loan debt payments looming, here's everything to know in light of the ruling.

When do we have to start paying student loans?

Student loan interest will start accruing on Sept. 1, and payments will restart in October. You’ll receive your billing statement or other notice at least 21 days before your payment is due. Those statements should include the payment amount, due date and any upcoming interest.

At-risk borrowers unable to pay off their debt initially will have some protections from default thanks to Biden's "on-ramp" repayment program.

Payments will still be due starting in October, and interest will accrue. But during the 12-month on-ramp period, borrowers with late, missed or partial payments will not be considered delinquent, reported to credit bureaus, placed in default or referred to collection agencies. Borrowers do not need to take any action to qualify. The period runs from Oct. 1, 2023, through Sept. 30, 2024.

"This is not the same as the student loan pause," Biden said Friday. "During this period, if you can pay your monthly bills, you should. But if you cannot, if you miss payments, this on-ramp temporarily removes the threat of default or having your credit harmed, which can hurt borrowers for years to come."

How many people are now on the hook for student loans?

About 26 million Americans had applied for forgiveness, and 16 million people had already received debt relief approval when the Department of Education stopped taking applications on Nov. 11, the day after a federal judge in Texas declared the debt forgiveness plan unlawful.

The White House estimated over the summer that up to 43 million federal loan borrowers, including roughly 20 million borrowers who would have had their full remaining balance canceled, would have been eligible for relief.

How much do debt holders owe?

The average borrower has about $38,000 in loans, according to a survey from Highway Benefits, an employee benefits platform company.The survey also showed that 89% of student debt holders said they weren't ready to restart payments and that 27% said one-third of their income will go toward their loans.

The Consumer Financial Protection Bureau said last month that half the student loan borrowers who will have to start making payments have at least 10% more debt than they did before the pause. Credit card debt and auto loans are part of what has led to a rise in borrowers’ debt loads, but on top of that, the CFPB said, interest rates on other debt could be rising, adding to borrowers’ debt.

I have student loan debt. What should I do now?

According to Federal Student Aid, an office of the U.S. Department of Education, the first thing borrowers should do is create a StudentAid.gov profile or make sure their contact information is current to avoid missing crucial updates. A profile also lets borrowers apply for repayment plans and complete loan counseling.

Then, check on your loan servicer’s website. People who aren’t sure who their loan servicer is can sign in to their StudentAid.gov profile and view those details under the “My Aid” section.

Servicers can remind you what your payments and responsibilities are, help you enroll in affordable repayment programs and manage other logistics of paying student loan bills.

If you had autopay before March 13, 2020, you must reenroll in autopay. Your payments won’t automatically restart.

How can I prepare to start repaying my student loans?

Here are some steps to consider:

• Put into a savings account the money you would need each month for your student loan repayment so it's earning a little interest until it has to be used.
• Check your employee benefits. For example, Aetna matches employees’ U.S.-based student loan payments up to $2,000 a year for a lifetime maximum of up to $10,000 for qualifying loans; PwC offers associates and senior associates up to $1,200 a year toward student debt; and Google matches up to $2,500 a year.
• Start cutting expenses and pick up a side hustle. Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit based in Plymouth, Massachusetts, said borrowers should reevaluate their expenditures and stop spending as though the debt is forgiven. She suggests borrowers set up interest-bearing accounts into which they can deposit amounts equal to their anticipated monthly payments. Though the interest on those accounts can be beneficial, what’s more helpful is the practice of budgeting and forming a new routine around those payments, Mayotte said.
• Check if you’re eligible to lower your payments with a new plan. You can speak to your servicer or use the online Loan Simulator for options.
• Know what your payments will look like and whether you’ll be able to afford them. If not, and if you don’t qualify for forgiveness, it may make sense to refinance at a lower interest rate if possible before payments restart, said Randy Lupi, financial professional with Equitable Advisors. Just note, though, that once loans are refinanced with a private company, they will no longer be eligible for any federal forgiveness programs, he said.
• Check your eligibility for other government loan forgiveness programs. “For example, individuals in the nonprofit field likely qualify for Public Service Loan Forgiveness, which does not have a cap on the amount of forgiveness, and should take this time to make sure they are properly enrolled,” Lupi said.
• Talk to an adviser. Anyone with student loans can speak with a mentor or financial adviser to educate themselves about their options. The Federal Student Aid website can help direct you to counselors, as well as organizations like the Student Borrower Protection Center and the Institute of Student Loan Advisors.
• Consider paying your loan down before repayments start. Because the student loan repayment pause includes a 0% interest rate, 100% of payments made during the pause go toward your principal, said Eric Schuppenhauer, head of national banking and lending at Citizens Bank. If you trim your loan amount, you may be able to cut the length of the loan and save money in the long run.

What’s the best way to repay student loan debt?

On the StudentAid.gov website, you can check out Loan Simulator to find a repayment plan that meets your needs and goals or to decide whether to consolidate.

You may still be eligible for student loan forgiveness

Forty-seven states and Washington, D.C., have their own state-based student loan forgiveness plans.

Most are tailored to a single industry or profession (doctors, teachers, police officers and farmers) or people who agree to work in places with a dire need for their services. Some may require the employee to work in a job for a certain period of time for their debt to be waived.

You can find a list of those states' programs here.

How can I reduce costs when paying off my student loans?

• If you sign up for automatic payments, the servicer takes a quarter of a percent off your interest rate.
• Income-driven repayment plans (IDRs) can make your payments more affordable, but aren’t right for everyone. That said, if you know you will eventually qualify for forgiveness under the Public Service Loan Forgiveness program, it makes sense to make the lowest monthly payments possible, as the remainder of your debt will be canceled once that decade of payments is complete.The Biden Administration Friday announced a new income-driven repayment plancalled the Saving on a Valuable Education (SAVE) plan, which cuts borrowers’ monthly payments in half and allows many borrowers to make $0 monthly payments.
• Reevaluate your monthly student loan repayment during tax season, when you already have all your financial information in front of you.
• Break up payments into whatever ways work best for you. You could consider two installments a month instead of one large monthly sum.

What if I can’t pay my student loan debt?

If you’re in a short-term financial bind, you can contact your loan servicer to request a temporary pause or lower payments through short-term relief (deferment or forbearance) as a last resort.

To determine whether deferment or forbearance are good options for you, you can contact your loan servicer. Interest may be charged during deferment or forbearance. Deferment and forbearance also affect loan forgiveness options, such as Public Service Loan Forgiveness or IDR plan forgiveness.

Need to contact your loan servicer? Expect long hold times.

You can get an estimate of your payment amount and due date through your loan servicer online or by phone. If you plan to call, though, don’t expect to get through the phone lines quickly.

The Department of Education modified its contracts with loan servicers that include cutting the pay they earn servicing each borrower and the minimum number of hours customer service centers must open each week.

“It’s going to be very busy for at least a couple of months with longer hold times,” Scott Buchanan, executive director at the nonprofit trade association Student Loan Servicing Alliance, told USA TODAY earlier this year. “It’s just a matter of whether it will be 30 minutes or two hours.”

What happens if I don’t pay student loans?

After the 12-month on-ramp period, a missed payment means your loan is delinquent. If your loan is delinquent for 90 days or more, your loan servicer will report the delinquency to the three major national credit bureaus. Delinquency will affect your credit score, which makes it harder to get credit.

After 270 days of delinquency, you’re in default and can lose your access to more student aid and damage your credit score.

The government can also take your tax refund, part of your Social Security benefits, or up to 15% of your paycheck to pay off your defaulted loan.

Is the fight to cancel student loan debt over?

No. Biden said Friday that he would pursue canceling student loan debt through the Higher Education Act of 1965, which he said authorizes the education secretary to modify, waive or compromise federal student loan under certain circ*mstances.

Contributing: Cora Lewis and Adriana Morga, The Associated Press