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Student Loan Forgiveness: Part 1

August 14, 2023

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The federal student loan payment pause that began as an interest-free payment in March 2020 is soon expiring. Once it does, anyone with student loans will begin accruing interest in September 1 with the first set of payments due in October. This applies to all federally held student loans.

If this impacts you, there are options. The Biden Administration launched its Saving on a Valuable Education (SAVE) plan on July 31. This income-driven plan allows qualified borrowers to benefit from lower monthly payments while limiting interest accrual and reducing the amount of money that would be paid back for a student loan. SAVE is expected to provide the lowest monthly payment of any income-driven repayment plan currently available for student loan holders.

More information is available from the federal government about the SAVE repayment plan. Click here for the latest updates on student loan forgiveness cancellation news.

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With the loan forgiveness cancellation program ending, borrowers holding loans from before March 2020 are expected to have the same balance due on their loan that had been in place when the pause began at that time. That balance will start accruing additional interest in September 2023.

The pause began as an emergency pandemic measure and had since received nine extensions. However, various news outlets including Fortune Magazine have estimated at least 40 million Americans will be impacted by these student loan payments. Borrowers who left school in 2020 or later may be faced with their first-ever student loan payments.

The fate of this pandemic pause was finalized on June 30 when the U.S. Supreme Court ruled against continuation of student debt cancellation. The establishment of the SAVE plan is intended to extend student loan relief to qualifying households.

It is unclear what the macroeconomic impact will be on the economy now that millions of Americans will now have student loan debt again. Moody’s Analytics estimated that the resumption of these payments will remove up to $70 million from the U.S. economy, driving down consumer spending. However, less consumer spending as a result of these payments could further moderate inflation, which would be a positive on your checkbook.

An upcoming post will provide recommendations from our advisors on how you can plan for student loan payments in the wake of these changes. Together, we’ll get to where you need to go to!