What to Know About the Student Loan Payment Pause Extension

Notebook page that reads "Student Loan Relief" with image of graduation cap and money

Federal student loan payments have been paused since March 2020, and the Department of Education recently announced that borrowers will have even more time before payments are set to resume. Though the loans have been in limbo for nearly three years now, it’s important to remain prepared for when the pause is lifted. To help you get ready for when payments resume, here’s what you need to know about the recent student loan pause extension:

Why the Student Loan Payment Pause Was Extended

Student loans were originally put on hold to provide economic relief at the beginning of the COVID-19 pandemic. Though the pause was only supposed to last for a few months, the pandemic continued to severely impact the financial stability of millions of Americans well beyond the expected timeline. To help borrowers through the ongoing public health crisis, the Trump and Biden administrations extended the pause several times over the last few years.

Before the most recent extension, student loan bills were scheduled to resume in January of 2023. However, the Biden administration also took steps toward Student loan forgiveness by announcing that a new program would discharge up to $20,000 of federal loans for each qualifying student.

Before students could find relief through loan forgiveness several states and institutions filed lawsuits against the plan to prevent it from taking effect. With the legality of the forgiveness program in question, the case has gone all the way to the Supreme Court. The Justices have set a hearing date on February 28, 2023, to determine whether the President has the authority to eliminate the loans without an act of Congress.

While student loan forgiveness is being debated in court, the payment pause will remain in effect. According to the Department of Education, the pause is extended because they “don’t think it’s right to ask you to pay on loans you wouldn’t have to pay were it not for the lawsuits challenging the program.”

When Will Student Loan Payments Resume?

Unlike the previous pause extensions, the most recent extension doesn’t have a specific end date. Instead, the timeline will be determined by the duration of the legal battle over the student loan forgiveness program.

If the Supreme Court reaches a decision prior to June 2023, then payments will resume 60 days from the date of that decision. However, if the Supreme Court does not decide by then, the payments will begin 60 days after June 30, 2023. The absolute latest that payments will resume is August 29, 2023 – though borrowers should remain prepared in case the pause ends sooner.

Student Loan Payment Pause FAQs

What does the pause on student loan payments mean?

The pause on federal student loans allows students to temporarily skip payments without consequences. The Department of Education stopped collections on defaulted accounts and set loan interest rates to 0% so that debt does not continue to accrue.

What if I was behind on my student loans before the pause began?

Millions of Americans were behind on student loan payments even before the pause began. To address this problem, the Department of Education announced the Fresh Start initiative, which provides relief to payers who are in default by:

  • Granting access to federal student aid for students with an unfinished degree
  • Not garnishing wages or withholding tax refunds and Social Security payments
  • Restoring the ability to rehabilitate loans later on down the road
  • Providing access to student loan forgiveness programs and IDR plans

Should I keep paying during the student loan pause?

It is possible to continue making payments during the student loan pause, and doing so could be beneficial depending on your situation. Ask yourself these questions to determine if it makes sense for you to continue repaying your loans:

  • Do I have other forms of debt? If you are swamped with debts outside of your student loans, then you should take this opportunity to pay off as much as possible. Use the cash you’re saving on student loans to pay down things like credit cards, personal loans, medical bills, and more.
  • Do I have a healthy savings account? The main purpose of the student loan pause is to give borrowers the chance to build financial stability. If you are living paycheck to paycheck without any backup savings, this payment pause may be a good time to fill up your bank account with a little extra padding.
  • Will I still have a large balance even if student loans are forgiven? If all of your debt could be forgiven through the student loan forgiveness program, then it’s best to wait until the Supreme Court reaches a decision to avoid making payments on a loan that could be wiped out entirely. However, if you will still have a lot left on your account even if a portion of your loans are forgiven – and you have the ability to pay – then it could be a good idea to continue with regular payments.
  • Can I eliminate student loans in bankruptcy? The Department of Education issued new guidelines in November to make it easier to eliminate student loans in bankruptcy.  Many people who could not eliminate student loans int eh past in a bankruptcy, can now utilize these new guidelines and eliminate their student loans.
  • Am I using an income-driven repayment (IDR) plan? With an IDR plan, your loan balance will be forgiven completely after making a certain number of qualifying payments. During the student loan payment pause, each month counts toward a qualifying payment regardless of whether or not you pay. With this in mind, it typically doesn’t make sense to continue with payments when enrolled in an IDR plan.

Will automatic payments restart once the pause is lifted?

Automatic payments will not restart on their own. Borrowers will have to opt-in to confirm their enrollment before payments will be taken out of their accounts.

Student Loan Debt Relief

With the student loan forgiveness program on hold, many borrowers are waiting eagerly for the Supreme Court to reach a decision before taking action. However, it’s best to be proactive so you are financially prepared for the payments to resume, no matter what the legal verdict is.

If you are feeling overwhelmed by your financial situation and are concerned about affording your student loans once payments start back up, don’t wait to get help! The debt relief attorneys at OlsenDaines can help you create a plan of action. With over 20 years of experience serving Oregon residents, we know how to access creative relief solutions that can take the stress of serious debt off of your shoulders. From finding other forms of student loan forgiveness to eliminating debts through bankruptcy, we can help you reach financial freedom no matter what your circumstances are.

Need help regaining control of your finances? Contact us to explore your options in a free legal consultation!

Explaining the New Bankruptcy Discharge Process for Student Loan Borrowers

Person adding up student loan debt on calculator

Over 42.8 million Americans have student loans, making it one of the most common forms of debt in the United States. While the amount of student loan debt has increased in recent years, it remains one of the most challenging types of debt to discharge through bankruptcy. However, the Department of Education recently reformed its policies to make the discharge process easier and more accessible to student loan borrowers. In this guide, we’ll explain everything you need to know about the new bankruptcy discharge process for student loans. 

Adversary Proceedings and “Undue Hardship”

In order to be considered for student loan discharge, individuals must initiate a separate lawsuit within their bankruptcy case called an “adversary proceeding”. During this process, the debtor is essentially suing the student loan lender. To do so, however, the debtor must demonstrate that he or she is experiencing “undue hardship” as a result of the loans.

Prior to these policy changes “undue hardship” was an undefined term in the bankruptcy code, which made it challenging for courts to judge each case by universal standards – leaving a lot of room for interpretation. 

In the past, most courts used something called the “Brunner Test” to determine who qualified for student loan discharge. This test was originally created in a 1987 court case during which a woman attempted to discharge her student loans less than a year after earning her degree. The goal of the test was to deter individuals from rushing into bankruptcy immediately after graduating, and it includes three questions:

  • Have you made a good-faith effort to repay the loans?
  • Are you unable to maintain a minimal standard of living while making the payments?
  • Is your financial situation likely to persist?

If the answer to each of these questions is “yes” and is supported by extensive evidence, then the loans can be discharged. 

On the surface, this may seem like a great system for discharging student debt. However, adversary proceedings are lengthy and costly, and they often weren’t successful because the requirements to pass the Brunner Test were still highly variable. Over time the test became increasingly difficult to pass, and many legal experts think it is now close to impossible to have loans discharged through this method.

How New Policy Changes Make Student Loan Discharge More Accessible

Debtors are still required to initiate an adversary proceeding within their bankruptcy case in order to be considered for student loan discharge.  The recent policy changes will ease the process by:

  • Setting clear standards for what is considered “undue hardship”: The current process uses arbitrary methods to review evidence and determine whether the debtor is experiencing undue hardship. According to the Department of Justice’s recent press release, the new process will include a thorough review of the debtor’s financial situation against concrete standards. These standards will be based on data provided by the Department of Education, along with other information that could contribute to undue hardship. This will ensure each debtor is judged fairly, without room for subjectivity.
  • Allowing for partial discharge if appropriate: Historically, student loans were either completely discharged or left entirely intact. The new policy changes allow for partial discharges depending on the debtor’s financial situation, which will make relief more accessible to those who are struggling with student loans. 

Considering Bankruptcy?

If you are overwhelmed with debt and need relief, don’t hesitate to contact the knowledgeable bankruptcy attorneys at OlsenDaines. Whether you’re dealing with significant student loans or other types of debt, we can assess your situation and help you determine the best course of action to regain financial stability. With over 40 years of experience serving individuals and businesses throughout the state of Oregon, we know how to help you with everything from foreclosures to creditor harassment. Whatever you’re facing, we can help. Just give us a call today to schedule your free legal consultation.

Bankruptcy and Student Loans

Ahh, the American dream. You start with nothing, get an education, work your assets off, and end up rich and successful. But is that really how it goes? Everyone knows that it is absolutely critical that you get a good education in order to get ahead. The average price of a college education can range anywhere from  $24,610 to $49,320! So what happens when you have little to no money yet need a college education or advanced degree to live the American dream? Many times, you take out student loans. And sometimes you end up living the American nightmare instead of the American dream. You find yourself drowning in student debt and despair.

Does that mean that you are you destined to drive a truck, work in the factory, be a farmworker, waitress, or work construction forever? Or that you have to always live near the poverty line in order to pay back your student loans?

We don’t think so. We believe that the poor should have access to good financial advice and be empowered with the financial information they need to not be taken advantage of when it comes to student loans or anything else.

Student Loan Debt.

We know that it is difficult to discharge student loan debt in bankruptcy. Most debtors won’t be able to discharge student loan debt through a Chapter 7 or Chapter 13 filing. But that does not mean you don’t have any options or possibilities.

The Undue Hardship Test.

Most courts are reluctant to discharge student loan debt. However, if you can qualify for the “undue hardship” exception, you may get your student loans discharged in bankruptcy. To qualify for undue hardship in Oregon, you have to be able to prove to the court that:

  • You have no money left over each month to pay your student loans
  • Your money problems aren’t going to get any better in the future
  • Over the years, you made a good faith effort to repay your student loans.

If you can answer these and other questions honestly, you may be able to qualify to have your student loans discharged.

Defenses to Student Loan Debt.

Another possible source of relief from student loan debt lies in unfair and illegal treatment. If you have defenses, such as a breach of contract, unfair business practices or fraud against your loan companies, you may not have to pay the debt at all.

Learn Your Options.

When it comes to student loan debt, there is no magic wand you can waive to get rid of them. But that does not mean you do not have hope or options. We are Oregon and Washington bankruptcy attorneys. We offer free consultations and we can help you. To set up an appointment, call us toll free at: 1-800-682.9568.

Can’t Pay Student Loan Debt? Here Are Your Options

If you have not looked at the subject in a while, you may be unpleasantly surprised when you learn about the current state of college tuition costs. The College Board has compiled some very meaningful statistics that shed light on the subject. During the 2016-2017 school year, the average annual cost for private college tuition was over $33,000. The average tuition charge for a public university was about $9600 for in-state students, but that figure skyrocketed to almost $25,000 for students from out-of-state who are attending public institutions of higher learning.

The cost of a college education is considerable, but at the same time, the price that you will pay if you go through life without an educational underpinning will probably be much more significant. However, when you digest these tuition figures (and they don’t include living expenses and supplies), you can understand why so many students accumulate significant student loan debt. According to Forbes, the average amount of student loan debt that was being carried by students in 2016 was just over $37,000. Of course, this is the average, so some students owed much more.

Can Bankruptcy Help?

Many students who graduate from college don’t earn enough money to keep their student loan payments current. Plus, there are individuals who are carrying student loan debt who never actually graduated. It would make sense to assume that you could file bankruptcy to wipe away your student loan debt, but in fact, bankruptcy is rarely going to be an option. Student loan debts are not discharged through a Chapter 7 or Chapter 13 bankruptcy filing unless you can prove that paying the debts would create an undue hardship for you. Very few people will be able to convince the court that they are in this position.

Outside of Bankruptcy

There are a few actions that you can consider if you are drowning in a sea of student loan debt. A lender may grant you a deferment or a forbearance that would suspend your payment plan for a temporary, agreed-upon interim. Plus, a number of federal student loan forgiveness programs exist, and this is an avenue that is worthy of exploration.

Schedule a Consultation Today

If you would like us to review your financial situation, including your student loans, we would be glad to provide a free case evaluation. We have offices in many different cities in Oregon including Eugene and Portland, and we also have locations in the state of Washington. To set up an appointment, send us a message through our contact page.