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HOUSTON, TEXAS – AUGUST 29: Students study in the Rice University Library on August 29, 2022 in Houston, Texas.

Brandon Bell |: Getty Images News |: Getty Images:

After President Joe Biden’s historic announcement that tens of millions of Americans would receive up to $20,000 in student loan forgiveness, borrowers’ celebrations were short-lived.

Conservative groups and Republicans soon brought a series of legal challenges to the president’s plan, arguing that the policy was unfair and an overreach of executive power. Two of those lawsuits successfully stopped the Biden administration from canceling hundreds of billions of dollars in student debt. In February, the US Supreme Court will have a final opinion on whether or not the program can continue.

The frustration and financial distress borrowers will feel if Biden’s amnesty program is rescinded, a likely outcome experts say, is likely to be massive.

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Borrower advocacy groups, in a recent brief to the high court, said student debt forgiveness is essential to the country’s recovery from a health crisis that has exacerbated financial hardship “for borrowers who have been at the mercy of decades.” about the broken student loan system.” Without repeal, they warned, “working and middle-class borrowers face a significant risk of default.”

However, if that’s the case, here are four other help options for struggling borrowers.

1. Defer payments (after restart)

A pandemic-era policy that freezes payments and accrues interest on federal student loans is still in place. The US Department of Education has announced that borrowers will not have to start making payments on their debt again until 60 days after the end of the trial over its forgiveness program.

If the court cases are still pending at the end of June, the bills will resume 60 days after that, at the end of August.

If you are currently unemployed or experiencing other financial difficulties, you can apply for economic hardship or unemployment deferment. These are ideal ways to defer your federal student loan payments because interest does not accrue.

However, if you are not eligible for any, you can apply forbearance to continue suspending your accounts. Just remember that in forbearance, the interest will go up and your balance will be higher, possibly much higher, when you resume paying.

2. Use the Public Service Loan Forgiveness Program

The Biden administration recently made a number of improvements to the Public Service Loan Forgiveness Program, which allows those who work for the government and some nonprofits to pay off their debt after a decade of payments.

There are usually three main requirements for public service loan forgiveness, although recent changes allow more leeway in certain cases.

  1. Your employer must be a government entity at any level, a 501(c)(3) nonprofit organization, or any other type of nonprofit organization that provides public services.
  2. Your loans must be federal direct loans.
  3. To qualify for forgiveness, you must have made 120 eligible, on-time payments on an income-based repayment plan or a standard repayment plan.

The best way to find out if your job qualifies as a public service is to fill out a so-called employer certification form.

In 2013, the Consumer Financial Protection Bureau estimated that 1 in 4 American workers may be eligible for the program.

3. Find a more affordable repayment plan

If you find that your student loan payments are too high when the bills start rolling in, you should look into different income-based repayment plans. These programs aim to make borrowers’ payments more affordable by setting their monthly payments at a percentage of their discretionary income and forgiving their remaining debt after 20 or 25 years.

To determine how much your monthly bill will be under different plans, use one of the calculators at Studentaid.gov or Freestudentloanadvice.org, says Betsy Mayotte of the nonprofit Student Loan Counselors Institute.

If you decide to change your repayment plan, Mayotte recommends that you submit this application to your servicer well in advance of the resumption of payments. Lenders are likely to be overwhelmed when they start collecting loan payments from tens of millions of people again.

“I have significant concerns that there will be some major service delays,” Mayotte said.

4. File for bankruptcy protection

The Biden administration recently announced updated guidelines that will make it easier for those burdened with student debt to discharge it in bankruptcy.

Currently, it is difficult, if not impossible, for someone to walk away from federal student debt through a regular bankruptcy process.

“The new rules offer some hope to federal loan borrowers who may struggle with their loans for 10 years or more,” Mayotte said.

The federal government will be less likely to object to borrowers’ attempts to pay off their debt, he said, if they are trying to pay off their student loans but don’t have a high enough income to cover the bill at the same time; meeting their basic needs.

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