What’s more, there’s no guarantee Biden’s new forgiveness plan could survive another legal challenge. Many questions still remain about the plans, and it’s not entirely clear yet how they will work. But that process can take months, or even longer, so this attempt at cancellation won’t come quickly. Exactly who will be eligible and how much will be canceled will be decided through a federal rulemaking process. The White House hopes to provide relief instead by using the Higher Education Act, a broad federal law that governs the student loan program. Separately, the administration plans to pursue student debt cancellation with a different legal justification than the one struck down by the Supreme Court. Biden said borrowers can and should make payments during the first 12 months after payments resume, but, if they don’t, they won’t be at risk of default and it won’t hurt their credit scores.
So you’re going to see your balance increase every month.”īiden announced a 12-month grace period when payments restart. “Forbearance allows you to postpone payments without it being held against you, but interest does accrue. All other federal student loans that are deferred will continue to accrue interest. That’s because interest generally does not accrue on Direct Subsidized Loans, the subsidized portion of Direct Consolidation Loans, Subsidized Federal Stafford Loans, the subsidized portion of FFEL Consolidation Loans, and Federal Perkins Loans. In the long term, those financial choices offer little benefit, as some loans will continue to accrue interest while deferred.Ībby Shafroth, senior attorney and director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said that, of the two, deferment is generally a better option. Rodriguez says her organization always advises against deferment or forbearance except once a borrower has exhausted all other options. Does it make financial sense at that point? Probably not.” And it can affect Social Security, retirement, and disability benefits.
“The federal government can administratively intercept tax refunds and garnish wages. “The repercussions of falling into delinquency can be pretty severe,” Rodriguez said. And many others qualify based on income and family size.
Carolina Rodriguez, Director of the Education Debt Consumer Assistance Program at the Community Service Society of New York, emphasizes that anyone temporarily unemployed should be able to qualify for a $0 payment plan.
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