President Bidens still hasn’t cleared student loans or made them dischargeable through bankruptcy. However, the President’s most recent move on the issue will be a great benefit to those with student loan debt.
As part of his pandemic relief plans, President Biden will remove student loan defaults from people’s credit reports.
Alongside this action, borrowers will be able to apply for reduced monthly payments. They could qualify for income-driven plans, which determine payments by evaluating discretionary income. Some who are currently below the poverty line may qualify for a $0 monthly student loan bill.
The Benefits of Student Loan Default Forgiveness
Defaults hit your credit score hard. Scores can drop by 100 or 200 points for a single default. Most immediately, having your default forgiven will increase your credit score.
Borrowers may benefit from this change in many ways.
- They could qualify for a car loan, mortgage, or credit card.
- Increased scores can help with employment, as many employers check your credit score before hiring.
- Better scores also help with housing, as many landlords and apartment complexes also check credit scores.
With a clean slate, borrowers can start over as well. They can get back on track, paying off their loans, and with potentially reduced monthly payments, doing so will be more manageable.
Drawbacks of This Change
Not everyone will benefit from the student loan default forgiveness. The pandemic was hard on many people who had more than just student loan debt. If you defaulted on a mortgage, car loan, etc., there are no new plans for you. You have forgiveness options, but they are the same as what existed before. It’s not easy to get approved for these options, and you may be stuck with your default.
Furthermore, income-driven repayment may not be available to everyone, even if your debt comes from a student loan. Many federal student loans won’t qualify.
Double Check Your Loan Agreement
If you believe that you are eligible for student loan default forgiveness, double check your loan agreements. Make sure that the loan is an officially designated student loan, not some other loan in disguise. If it is not a federal loan, look into having your monthly payments reduced through income-driven repayment.
If you’re having a hard time deciphering the complex paperwork, contact an attorney for help. They should be able to review your plan and give you options. Also, if a default still appears on your record after the next few months, get an attorney to make sure you weren’t overlooked.
Our firm is committed to debt relief. If you can benefit from default forgiveness, and you need help, call us today at (727) 877-3188 for a free consultation. You may also contact us online.