Payments on federal student loans, on pause since March 2020, will resume this fall. Student loan interest will start accumulating as of September 1, 2023 and student loan payments will be due in October.
The pause on payments and interest were ordered at the onset of the Covid 19 pandemic to ease financial pressure on borrowers, many of whom were forced to stay home from work. However, recently Congress agreed that there would be no more extensions on payments.
This, as the Supreme Court decides whether to approve 10K in loan forgiveness to borrowers earning less than $125K or 20K for Pell Grant recipients who meet the income standard. The Supreme Court may or may not consider the legality of the proposed loan forgiveness before they break the end of June, so borrowers should prepare to pay based on current outstanding loan amounts.
Forty million Americans will have to start paying back their student loans, marking a decrease in disposable income for many. The vast majority of borrowers owe under 40k, with 7 million below age of 25 with less 14k in loans out. These younger borrowers are more likely to default because they either dropped out of school or are unable to find jobs.
The Consumer Financial Protection Bureau states that 1 in 5 borrowers in the U.S. already had risk factors going into the reprieve and 1 in 13 are now behind on other debts not related to student loans. Unfortunately, as welcome as the 3 year break was for many, over half of borrowers increased non student debt in last 3 years rather than tackling existing debt setting themselves up for more financial problems when loans come due.
Bankruptcy and Federal Student Loan Debt
Those facing financial difficulties not only carry federal student loan debt, but may also have credit card debt, loans, and medical expenses that all add up to what feels like an impossible situation. Although typically student loans are not discharged in a bankruptcy, some are able to discharge other unsecured debt such as high interest credit card balances making it possible to pay off their student loans.
Working With an Experienced Bankruptcy Lawyer
The best place to start is by discussing your particular situation with an experienced bankruptcy attorney who can advise you on the best strategy to tackle your unique financial situation. Bankruptcy is your right and it is certainly worthwhile to explore chapter 7 or 13 personal bankruptcy to eliminate debt and get a fresh start. Contact the Peoria bankruptcy law office of Charles E. Covey for immediate assistance today at 309-674-8125.