For
Earlier this month, a federal judge in Texas struck down the program, the latest blow in a series of legal challenges that have upended the initiative. Borrowers are currently unable to submit applications to have up to $20,000 forgiven, and with the almost three-year freeze on required loan payments scheduled to end Dec. 31, they're losing hope that the debt relief will ever happen.
When payments restart, a wave of defaults could soon follow, especially as stubbornly high inflation, punishing housing costs and a growing number of job cuts cascade through the economy. Although the White House is reportedly considering an extension of the moratorium, no concrete announcement has been made, and financial advisers say borrowers should prepare to face those monthly bills again.
Many aren't sure how they'll afford it.
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"It's been a rollercoaster," said Kayla Walker. "I've written it off now. I feel like it's unlikely to happen."
The 26-year-old from Virginia has about $40,000 in federal student debt and another $7,000 in private loans. She applied for forgiveness when the application opened, but cynically views the plan as "an election point" that politicians used to garner votes.
As she prepares to face a $185 monthly bill for her federal loans starting in January — plus the $130 payment for her private ones — Walker is considering moving back in with her parents.
"It's all been really up in the air and hard to make decisions without knowing what's going to happen with loan forgiveness," she said. "If these loans restart, there's no way my
More than 26 million borrowers have already submitted the information needed to be considered for Biden's plan, which would
In the meantime, nearly two-thirds of student loan experts surveyed by Bloomberg News expect another extension of the payment freeze. On Monday, a
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That's what Mariah Jae in Brooklyn is hoping for. The 31-year-old, who works in
If payments do resume, she'd be facing a $440 monthly bill, which would be "incredibly difficult."
"I already live paycheck to paycheck," Jae said. "Maybe I couldn't afford my apartment. It would be a big lifestyle change."
According to the Federal Reserve, borrowers were billed
The payment freeze, as well as pandemic stimulus payments, allowed some borrowers to stop living paycheck to paycheck and save money, said Soraya Joseph, senior managing editor for financial-literacy platform The Financial Diet. Now, she's urging people to create a contingency plan in case payments start up again.
"At the end of the day, it is essential for people to keep in mind that payment deferred does not mean payment deletion," she said.
Some borrowers who have already received refund checks from the government are worried they'll have to pay them back.
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As part of the COVID-19 stimulus program, those who made payments during the pandemic are eligible to get the money back, which some are requesting under the assumption that they'll have at least $10,000 forgiven. If the debt cancellation doesn't happen, they may be on the hook to repay that money.
"It's pretty depressing," said Maura McBride, a 25-year-old in Milwaukee. "Even though I got money back, I'm afraid that I'll have to pay it back, and if not I'm sad for my friends that still have their loans."
She graduated with about $15,000 in student debt and paid $10,000 off during the pandemic. She's received $6,000 in refunds so far and is waiting on an additional $4,000.
For Rebecca Acuna, a 27-year-old legal assistant in Indiana, the potential for cancellation feels like a waiting game. She has about $22,000 in federal loans and $4,000 in privates ones. Since she was a Pell Grant recipient, she should theoretically get $20,000 forgiven, but that's all uncertain now. "I'm devastated," she said. "I just can't fathom how I'm going to be able to afford the payments, on top of predatory interest rates resuming. It all seems hopeless."
