Since the start of the federal student loan payment stop in March 2020, the outstanding student loan debt has plateaued, which is a welcome break from the pattern of increasing family debt balances.
Many borrowers have been able to pay down the principal balance of their loans and lower their overall debt because interest rates on federally held student loans have been maintained at 0% for the previous three years.
Additionally, under President Joseph Biden, the Department of Education has offered targeted student loan relief totaling nearly $48 billion through initiatives including Borrower Defense to Repayment and Public Service Loan Forgiveness.
Yet, this short-term remedy will probably expire soon. Although payments (and interest accrual) may start earlier, the Department of Education states that the student loan payment halt will last for at least 60 days beyond June 30, 2023.
Everything hinges on whether the Supreme Court will uphold Biden's plan to cancel student loans and how the government would proceed if student debt relief is ruled unconstitutional.
It's hard to predict what will happen to student loan balances once the Supreme Court rules because so much depends on it. Yet, we can posit two possibilities.
The Congressional Budget Office calculates that the Biden administration's proposed student loan forgiveness program would erase nearly $430 billion of the nation's total outstanding student loan debt.
Nevertheless, if the plan is invalidated and interest starts to accrue once more in late August, the $1.6 trillion sum of outstanding student loans will only increase.
Naturally, Biden's plan to reduce student loan debt only applies to federally owned debt, not to private student loans, which, according to data sharing platform MeasureOne, account for around 7.6% of the total amount of outstanding student loan debt. Borrowers of private student loans who aren't qualified for federal help could think about refinancing to reduce their debt sooner.
Many borrowers have been able to pay down the principal balance of their loans and lower their overall debt because interest rates on federally held student loans have been maintained at 0% for the previous three years.
Additionally, under President Joseph Biden, the Department of Education has offered targeted student loan relief totaling nearly $48 billion through initiatives including Borrower Defense to Repayment and Public Service Loan Forgiveness.
Yet, this short-term remedy will probably expire soon. Although payments (and interest accrual) may start earlier, the Department of Education states that the student loan payment halt will last for at least 60 days beyond June 30, 2023.
Everything hinges on whether the Supreme Court will uphold Biden's plan to cancel student loans and how the government would proceed if student debt relief is ruled unconstitutional.
It's hard to predict what will happen to student loan balances once the Supreme Court rules because so much depends on it. Yet, we can posit two possibilities.
The Congressional Budget Office calculates that the Biden administration's proposed student loan forgiveness program would erase nearly $430 billion of the nation's total outstanding student loan debt.
Nevertheless, if the plan is invalidated and interest starts to accrue once more in late August, the $1.6 trillion sum of outstanding student loans will only increase.
Naturally, Biden's plan to reduce student loan debt only applies to federally owned debt, not to private student loans, which, according to data sharing platform MeasureOne, account for around 7.6% of the total amount of outstanding student loan debt. Borrowers of private student loans who aren't qualified for federal help could think about refinancing to reduce their debt sooner.