Sonoma County residents prepare for return of student loan payments after Supreme Court ruling

Some student loan borrowers are dismayed — but not surprised — at the Supreme Court ruling Friday that invalidated President Joe Biden’s loan debt relief plan.

But many don’t have the time to ponder the court’s decision — they’re too focused on how they’re going to make the payments once they resume. The promise they would no longer have to stretch themselves — and their wallets — thin was false hope.

Borrowers are now weighing how they will move forward.

Corey Preston has been paying down his student loans for the last 15 years. The Napa County resident, who frequently shops in Sonoma County, will return to paying $750 a month for his public and private loans as he did before they were postponed amid the COVID-19 pandemic.

“The pause has helped but it’s a (bandage) on a missing limb,” he said.

“The (Supreme Court) decision is unsurprising as is the reaction of many others of ‘you signed the loan, pay it back.’”

Lisa Meacham, a 61-year-old Petaluma resident, estimated she has $16,000 in student loan debt from a stint at graduate school a few years back. She was qualified to have $10,000 forgiven under Biden’s plan.

She’s unsure of the precise total of her debt and is waiting for her loan provider to tabulate her monthly payments, she said.

In the meantime, she’s trying to prepare for the inevitable day when the bill comes due.

“I think (the Supreme Court) was preparing for it, and I’m not really surprised,” Meacham said. “It’s just going to be a wait-and-see game because I have no idea what’s coming today, tomorrow or the next day.”

Financial aid officers are also feeling the sting.

Rachael Cutcher, director of student financial services at Santa Rosa Junior College, said she’s disheartened by the decision, especially for the students.

“When we advise students about loans, we are very upfront that they are going to have to repay them,” she said.

“But when something is put out there as a real, tangible benefit to relieve student debt and it’s pulled out from underneath them, it’s devastating.”

It’s too early to determine the ruling’s ramifications on the economy, said Sonoma State University economist Rob Eyler. But he’s immediately concerned by how it may affect the future workforce and productivity.

“That means there’ll be fewer people who would go to university and saw (loan forgiveness) as an incentive to go or to stay... Does that then mean there’s going to be a change in the number of people who have college degrees later?” he said.

“It’ll be intriguing to see how many universities end up reporting out that they have a loss of retention of students.”

Cutcher agreed with Eyler’s assessment. She said the ruling will especially have an impact on students and access of four-year institutions rather than two-year because educational costs are naturally higher for longer programs.

“It will affect some students at the community college level but not at the same level,” she said.

What will Biden do next?

In a press conference following Friday’s ruling, the Biden administration announced it has already taken two steps to provide debt relief for as many borrowers as possible.

A fact sheet from the White House press room said the Department of Education is instituting a 12-month “on-ramp” to repayment, from Oct. 1 to Sept. 30, 2024.

This means borrowers who miss monthly payments during this period will “not be considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.”

The news release also discussed the Saving On a Valuable Education plan, an income-driven repayment plan aimed to cut borrowers’ monthly payments in half, something all student borrowers in repayment will be eligible to enroll in later this summer before payments are due. (It’s not clear when repayment will begin: Cutcher said the Department of Education said it would provide more guidance “soon.”)

The Saving On a Valuable Education plan would:

• Cut the amount that borrowers have to pay each month in half from 10% to 5% of discretionary income for undergraduate loans.
• Raise the amount of income considered non-discretionary income, making it protected from repayment. According to the White House’s release, no borrower earning under 225% of the federal poverty level — or about a minimum hourly wage of $15 — a year for a single borrower, will have to make a monthly payment under this plan.
• Forgive loan balances after 10 years of payments instead of 20 years for borrowers with original loan balances of $12,000 or less.
• Not charge borrowers with unpaid monthly interest so that no borrower’s loan balance will grow as long as they make their monthly payments, even when that payment is $0 because of low income.

What should you do next?

Multiple dates have been floated as to when the payment pause on student loans ends, but no specific date has been set, according to both Cutcher and Eyler.

But, Eyler said borrowers should expect to start repaying their loans in the fall.

Meanwhile, Cutcher said, there are steps borrowers can take to prepare for when the payments resume.

Find out how much you owe: With payments on pause for the last few years, borrowers likely haven’t thought about their Federal Student Aid ID or the password for their loan provider’s website.

Cutcher said it’s important for borrowers to become reacquainted with how much they will owe and what monthly payments will look like, along with terms, penalties and conditions associated with each loan.

Keep an eye out for messaging from your loan provider: One thing to definitely not do, Cutcher said, is ignore anything about upcoming payments.

There are many options to tackle these payments, she said. She suggested not ruling out loan consolidation or refinancing.

She also advised borrowers to start budgeting for those monthly payments now, despite a still uncertain timeline for repayment, and talk with loan providers about ways to tackle these payments once they officially resume.

Beware of potential scams: Cutcher advised borrowers to be wary of any calls or inquiries offering assistance in refinancing loans.

The borrower should be the one to initiate the conversation with their provider, she said, and to only work with reputable organizations.

“If it sounds too good to be true, it probably is,” she said. “And don’t ever give away personal information like bank info, social security numbers and the like.”

If borrowers weren’t expecting a call but are contacted by a number that appears to be their lender and it feels dubious, she said, hang up and call the provider back to confirm.

You can reach Staff Writer Sara Edwards at 707-521-5487 or sara.edwards@pressdemocrat. com. On Twitter @sedwards380.

A fact sheet from the White House press room