Americans owe a whopping $1.78 trillion in student loan debt, making it the second-highest consumer debt category behind mortgage debt.
Joe Biden has had his eyes fixed on the country's student loan dilemma ever since he ran for president in 2020. He pledged to cancel at least $10,000 of student loan debt per person in an effort to free people from having to choose between paying student loans and paying the rent.
But this summer could be a turning point for borrowers. If you haven't been keeping up with student loan debt news, here are two things you should pay attention to.
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Student loan payments are scheduled to resume soon
The student loan payment pause is coming to an end soon. The yearslong payment holiday will expire 60 days after June 30, according to guidance spelled out in the debt ceiling deal. For the first time since March 2020, millions of borrowers will have to use a portion of their paychecks to cover student loan repayments.
The interest-free student loan repayment freeze was extended multiple times under both the Trump and Biden administrations. Chances are slim that there will be any additional extensions because Congress passed a law preventing further delays in ending the payment pause.
That means interest will resume accruing on your student loan starting September 1. But you won't need to worry about payments again until October, and your exact payment date will vary. You'll receive a notification before your first bill is due.
Student loan forgiveness is still up in the air
If your student loan is forgiven, you might not have to worry about future payments. But at this point, whether that will happen is still a big question.
The Supreme Court is expected to provide a ruling on the Biden administration's student loan forgiveness plan this month. The plan could erase up to $20,000 in federal student loans for each qualified borrower, but it could cost an estimated $400 billion to implement.
Biden's student loan forgiveness plan is designed to provide relief to individuals who make less than $125,000. The income threshold for families is twice that amount.
Although student loan forgiveness is still on the table, don't assume it will come to pass. Use this time to beef up your emergency fund and savings. That way, you'll be ready to tackle your obligations no matter what the final decision ends up being.
The future of student loans
If student loans are forgiven, the president will fulfill one of his campaign promises. But if the Supreme Court doesn't rule in his favor, Biden will most likely take another stab at a student loan plan if he gets a second term.
Regardless of how student loan forgiveness eventually plays out, borrowers will be on the hook for payments starting in the fall. Save as much as possible now so you can be on track to start paying whatever is needed when payments resume. The more planning you do now, the more control you'll have over your finances later.
