The Supreme Court killed debt relief. Here’s what’s next for borrowers.
The U.S. Supreme Court overturned President Joe Biden’s student debt relief program Friday, ruling that canceling $10,000 to $20,000 in student debt per borrower was beyond the president’s executive authority.
The order would have erased $10,000 for borrowers making less than $125,000, or a total income under $250,000 for married couples. Borrowers who received a Pell grant in college would have been eligible for $20,000 in debt relief. About 40 million Americans would have been eligible for relief, according to the White House, with about 20 million seeing their debts erased completely.
For borrowers, Friday’s ruling may come as an unpleasant reminder that their federal loans will start accruing interest again on Sept. 1. Repayments will resume in October.
For grads, and parents, who have to start thinking about loan repayments again, here are five things to know:
You are not alone
The high court’s decision will impact the more than 2.7 million Floridians with student loans who owed more than $105 billion in total as of March 31, according to the latest data from the U.S. Department of Education. That number is for federal loans — including the Federal Family Education Loans, Direct Loans and Perkins Loans — and not private loans.
On average, Floridians owe $38,653 per borrower — one of the highest debt burdens in the nation. But the number for most borrowers is much lower. About one in three owes less than $10,000, and more than half owe less than $20,000.
The profile of who owes student debt in Florida is getting older. More than half of borrowers in Florida are over 35, and nearly one in 10 are 62 or older.
How to prepare
Borrowers should prepare now to avoid any surprises in October, said Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit that provides support for student borrowers.
The first thing to do is check your servicer at StudentAid.gov, Mayotte said. Many loans may have changed servicers in the past three years, and it can be disruptive or annoying to have to navigate a new website at the last minute.
Borrowers should also check their contact and banking information and make sure auto-payments are set up, Mayotte said.
Borrowers can use a loan calculator on StudentAid.gov to make sure they’re on the best income-driven payment plan and estimate monthly payments under each option. That may be important if your financial or family situation has changed in the past three years, and it can take time to apply for a different payment option.
There are other ways to get loan forgiveness
But this applies only in special circumstances. Friday’s decision did not impact other federal programs for public employees, borrowers who qualify as permanently disabled and those who were defrauded by private for-profit universities.
Florida also has loan forgiveness programs for teachers and health care professionals working in underserved areas.
Try to avoid missed payments
It’s not uncommon for borrowers to find money tight. More than 17% of borrowers in Florida were more than 90 days behind on student loan payments at the start of the pandemic, according to federal data.
Income-based repayment plans don’t take cost of living into account, and Tampa Bay’s rocketing cost of living may make it tempting to put off student loan payments.
That would be a mistake, said Mayotte, the student loan advisor. Missing payments can put you into delinquency and eventually default, which can hurt your credit rating and make it harder to get a car or house loan down the line.
Borrowers who become delinquent may also miss out on additional government aid and benefits, including Social Security, retirement and disability benefits.
Loan deferment is an option for emergencies, but it’s not a long-term solution, Mayotte said.
“It’s hard to hear,” she said, “but you’ll need to take a look at your spending and ask: ‘What can I cut back on?’”
Where to find help
If you still have questions or need help navigating loan repayment, there are many organizations that offer free help, starting with the Federal Student Aid Information Center. There you can learn more about repayment options and get assistance with loan recertification.
The Institute of Student Loan Advisors offers advice on choosing a repayment plan and what to do if you find yourself in delinquency or default.
For borrowers in default or who need to file a claim against a borrower or institution, the National Consumer Law Center’s Student Loan Borrower Assistance publishes an up-to-date list of student loan lawyers who might be able to help.
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