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. WHAT DID PRESIDENT BIDEN PROPOSE WHEN HIS PLAN WAS STRUCK DOWN?īiden announced a 12-month grace period when payments restart. The 6-3 decision, with conservative justices in the majority, also rejected arguments that a bipartisan 2003 law dealing with student loans provided the authority Biden claimed. The sharply divided court held the Biden administration overstepped its authority in trying to cancel or reduce student loans for millions of Americans, saying the administration needs the endorsement of Congress before undertaking so costly a program. Of those, 20 million would have had their remaining student debt erased completely. Supreme Court has ruled that the Biden administration overstepped its authority in trying to cancel or reduce student loan debt, effectively killing the $400 billion plan, which would have canceled up to $20,000 in federal student loans for 43 million people. So you’re going to see your balance increase every month.” HOW DID THE SUPREME COURT RULE ON STUDENT LOAN FORGIVENESS? “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. " Puerto Rico's Debt Restructuring Process.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. " Puerto Rico: Factors Contributing to the Debt Crisis and Potential Federal Actions to Address Them."įinancial Oversight & Management Board for Puerto Rico. " UPDATE 1-Puerto Rico's Creditors Should Prepare to Sacrifice -Governor." “ What Happens If I Default on a Loan?”Įxperian. Debt Credit Rating Downgraded, Only Second Time In Nation’s History."Įxperian. " Fitch Downgrades the United States' Long-Term Ratings to 'AA+' from 'AAA' Outlook Stable." " Greece to Default on $1.73 Billion IMF Payment."įitch Ratings. " Office of Research Blog: Initial Fresh Start Program Changes Followed by Increased Credit Scores for Affected Student Loan Borrowers." " Get Out of Default With Fresh Start."Ĭonsumer Financial Protection Bureau. " COVID-19 Emergency Relief and Federal Student Aid."įederal Student Aid. " Biden-Harris Administration Continues Fight for Student Debt Relief for Millions of Borrowers, Extends Student Loan Repayment Pause."įederal Student Aid. " Collections on Defaulted Loans."įederal Student Aid. " Government Hits Reset on Student Loan Defaults, But Many Could Experience Default Again."įederal Student Aid. " What is a Judgment?"įederal Student Aid. " What Does “Charge off” Mean on a Credit Report."Ĭonsumer Financial Protection Bureau. " Credit Card Penalty Fees (Regulation Z)."Įxperian. " Chapter 11-Bankrupty Basics."įederal Register.
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