The Southern University Human Jukebox marching band warms up before the 2023 National Battle of the Bands at NRG Stadium, Saturday, Aug. 26, 2023, in Houston. Student loan payments resume in October after a three-year pause due to the pandemic. (Michael Wyke/AP)
NEW YORK — President Joe Biden is making another attempt at student loan cancellation after the Supreme Court ruled earlier this year that his administration couldn’t forgive $400 billion in student loan debt using a 2003 law called the HEROES Act.
The first of three hearings took place Tuesday, when more than a dozen people chosen by the Biden administration met to begin a process known as “negotiated rule-making” to try to bring cancellation to more borrowers under the authority of the Higher Education Act. We don’t know yet who would be eligible for forgiveness or how much relief they would get.
The legal process now underway, which includes negotiators from outside the government meeting virtually for three two-day sessions, will last until mid-December.
Meanwhile, federal student loan borrowers began making payments again this month after a three-year-plus pause due to the pandemic. Here’s what you need to know:
WHAT IS NEGOTIATED RULE-MAKING?
The Education Department regularly uses negotiated rulemaking, and it’s required for any laws related to student aid. The process is designed to gather input from people outside of the federal government who represent a range of viewpoints on student loans.
The negotiators include students and officials from various colleges, along with loan servicers, state officials and advocates including the NAACP. If they can agree on a proposal, the department will move forward with it. If they can’t, the Education Department will come up with its own plan.
WHY IS THIS HAPPENING NOW, AND HOW IS IT DIFFERENT FROM THE LAST PLAN?
Biden directed the Education Department to find another path to loan relief after the conservative court ruled that he couldn’t cancel loans back in June. The new attempt rests on a sweeping law known as the Higher Education Act, which gives the education secretary authority to “waive or release” student loans. How far that power extends is the subject of legal debate.
“The HEA gives the Secretary of Education the authority to ‘enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand,’ including federal student loans,” said Under Secretary of Education James Kvaal. “Our current regulations lack specificity on how that authority is applied.”
MEANWHILE, I STILL HAVE TO PAY BACK MY LOANS. WHERE DO I START?
The first step is to log in to your StudentAid.gov account and check who your loan servicer is. Many loan servicers changed during the pandemic, so you might have a different one than you did back in March 2020, said Amy Czulada, outreach and advocacy manager at the Student Borrower Protection Center.
Once you know your loan servicer, you’ll log into your account to access your student loan balance, monthly payment amount and interest rate. Czulada also recommends you look at which type of student loan you have, so you know which income-driven repayment plans you might qualify for.
Lastly, update your personal information in your account with your loan servicer to make sure you receive all important correspondence.
HOW DO I KNOW WHAT MY PAYMENTS WILL BE?
At least 21 days before your due date, you’ll receive a bill that lays out how much you have to pay each month. It’s likely that most borrowers have received their bill already. If you haven’t, visit your loan servicer account. Interest began accruing again in September.
Borrowers can find out what their monthly student loan payment will be by reviewing their account with their loan servicer. If you don’t know who your servicer is, you can find it by logging in your studentaid.gov account.
If you have student loans and haven’t made a payment in the last three years, don’t panic.
WHAT IF MY PAYMENTS ARE TOO HIGH?
If you think you’ll have a hard time making payments once they resume, you have several options.
This summer, Biden announced a 12-month grace period to help borrowers who struggle after payments restart. You can and should make payments during the first 12 months after payments resume, but if you don’t, you won’t be at risk of default and it won’t hurt your credit score. Interest will accrue whether you make payments or not.
Betsy Mayotte, president of The Institute of Student Loan Advisors, recommends that you research if you qualify for an income-driven repayment plan. Borrowers can use the loan-simulator tool at StudentAid.gov or the one on TISLA’s website to find a payment plan that best fits their needs. The calculators tell you what your monthly payment would be under each available plan, as well as your long-term costs.
WHAT’S AN INCOME-DRIVEN REPAYMENT PLAN?
An income-driven repayment plan sets your monthly student loan payment at an amount that is meant to be affordable based on your income and family size. It takes into account different expenses in your budget, and most federal student loans are eligible for at least one of this type of plan.
Generally, your payment amount under an income-driven repayment plan is a percentage of your discretionary income. If your income is low enough, your payment could be $0 per month.
Last year, the Biden administration announced a new income-driven repayment plan — SAVE. The SAVE plan offers some of the most lenient terms ever. Under this plan, interest won’t pile up as long as borrowers make regular payments.
It’s still possible that the SAVE plan could face legal challenges similar to the one that led the Supreme Court to strike down Biden’s proposal for mass student loan cancellation.
WHAT ARE OTHER PROGRAMS THAT CAN HELP WITH STUDENT LOAN DEBT?
If you’ve worked for a government agency or a nonprofit, the Public Service Loan Forgiveness program offers cancellation after 10 years of regular payments, and some income-driven repayment plans cancel the remainder of a borrower’s debt after 20 to 25 years.
Borrowers should make sure they’re signed up for the best possible income-driven repayment plan to qualify for these programs.
Borrowers who have been defrauded by for-profit colleges may also apply for borrower defense and receive relief.
If you’d like to repay your federal student loans under an income-driven plan, the first step is to fill out an application through the Federal Student Aid website.
HOW CAN I REDUCE COSTS WHEN PAYING OFF MY STUDENT LOANS?
If you sign up for automatic payments, the servicer takes a quarter of a percent off your interest rate.
HOW DO I ENROLL IN AUTOMATIC PAYMENTS?
You can enroll in automatic payments through your loan servicer’s account. Borrowers who were enrolled in automatic payments prior to the payment pause need to re-enroll again, Czulada said.
WHAT ELSE SHOULD I KNOW?
Czulada recommends borrowers staying vigilant about scams. You should never have to pay to get help with your loans or to apply for any programs.
“The Department of Education will never call you on the phone. So, if you’re getting a phone call that says ‘Hey, pay $100 now and you’ll get your debt canceled,’ that’s a red flag,” said Czulada. “It’s a scammer.”
To protect yourself from fraud, the Department of Education recommends that you only correspond with their official email addresses, that check for typos in ads, and that you never share log-in information.
Associated Press Writer Collin Binkley in Washington contributed to this report.
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