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September 27, 2023

Student Debt Update

Federal Loan Payments Restart October 1st

Student loan borrowers received some relief during the COVD-19 pandemic when  payments were suspended, but payments resume in October.

Student loan borrowers received some relief during the COVD-19 pandemic when payments were suspended, but payments resume in October.

Average law school debt has skyrocketed to $160,000, which has made it financially difficult for many law school graduates to realistically consider even the possibility of starting a family. Student loan borrowers received some relief during the COVD-19 pandemic when federal student loan payments were suspended, but affected borrowers are now expected to resume making regular payments beginning in October 2023.

The student loan payment pause was originally put into place by Congress in March 2020 at the outset of the pandemic, and then extended by both the Trump and Biden Administrations to assist borrowers during an unprecedented time of economic turmoil and uncertainty. Now that the global health crisis has been largely contained, the federal government decided to sunset the moratorium on student loan payments. As such, it is important for borrowers to understand that the accumulation of student loan interest on their federal student loan debt resumed on September 1, 2023, and payments will once again be due starting in October.

The American Bar Association (ABA) understands that thousands of student loan borrowers, including many new attorneys, have questions and concerns about their repayment plan options as the forbearance period that lasted over three years quickly draws to a close.

The ABA has been actively engaged on this issue for many years, and consistently advocates on behalf of student loan borrowers, which is why the Governmental Affairs Office organized a Student Debt Week of Action in 2021. The ABA Young Lawyers Division has also assembled a convenient repository of helpful resources at ambar.org/debt that can provide additional clarity for borrowers as they consider their options on how to resume making payments or manage their debt .

Additionally, the White House has tried to assist borrowers by creating a Fact Sheet that helps answer questions and provide further assistance to borrowers and their families. For example, borrowers should know that even though payments are set to resume in October, the Department of Education has instituted a transition towards repayment, “running from October 1, 2023, to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.”

Borrowers should be aware that the Administration also introduced the Saving on a Valuable Education (SAVE) plan, which is an income-driven repayment (IDR) plan intended to “cut borrowers’ monthly payments in half, allow many borrowers to make $0 monthly payments, save all other borrowers at least $1,000 per year, and ensure borrowers don’t see their balances grow from unpaid interest.”

To learn more about student debt relief developments as they happen, follow us on social media platforms @ABAGrassroots.

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