If you’re one of the millions of Americans affected by the Supreme Court’s decision to strike down student loan forgiveness, financial advisors have tips before payments resume.
The high court on Friday blocked President Joe Biden‘s plan for federal student loan forgiveness, which would have provided borrowers up to $20,000 of relief.
As the payment pause ends, the ruling will have a “detrimental impact” on borrowers still recovering from the pandemic or wrestling with inflation, according to Ethan Miller, a certified financial planner and founder of Planning for Progress.
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Congress agreed not to extend the student loan payment pause again in June as part of the debt ceiling deal, with interest resuming on Sept. 1 and payments due in October, according to the U.S. Department of Education.
“For some folks, it will require some hard choices,” said Miller, a Washington, D.C., area planner who specializes in student loans. “And for other borrowers, it is going to require a fundamental reimagining of their finances.”
Over the past few years, the student loan pause has provided freedom from payments, which has allowed some borrowers to save for buying a home or starting a family, he said. “This is just a ton of bricks falling right back down on some of those dreams.”
For some folks, it will require some hard choices, and for other borrowers, it is going to require a fundamental reimagining of their finances.Ethan MillerFounder of Planning for Progress
Biden’s plan would have cleared the student loan balances of around 14 million people, according to estimates from some experts. The cancellation also applied to so-called Parent PLUS loans, which are federal loans parents can use to help dependent children with college expenses.
“It’s very disappointing for a lot of Americans,” added Becca Craig, a Kansas City-based CFP at Buckingham Strategic Wealth, who also specializes in student loan planning.
Review your student loan repayment plan
Craig urges borrowers to review their student loan repayment plan options and possibly make a change, depending on your overall financial goals.
“For a lot of borrowers, it’s really the lowest payment possible because they’re shooting for public service loan forgiveness or income-driven repayment forgiveness,” she said.
While the final details still haven’t been released, borrowers should also watch for updates on Biden’s new repayment plan, which could significantly lower future monthly payments, Craig said.
In the meantime, you should double-check your loan servicer, which may have changed over the past three years, along with income certification, banking details and more.
For borrowers with income-driven repayment plans, it’s important to watch for the deadline to recertify your income, Miller said. However, there may be opportunities to lower your payments, depending on when you submit the paperwork.