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Five Reasons for Student Loan Borrowers to Look Forward to 2023

Borrowers have many reasons for optimism about life with student loans in 2023.

Written By: Michael P. Lux, Esq.

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The new year brings a fresh start and hope for a better tomorrow.

In this spirit of optimism, it’s worth looking at the many things that might improve for student loan borrowers in 2023.

An IDR Count Update Will Bring Many Closer to Student Loan Forgiveness

The path to student loan forgiveness hasn’t been easy on borrowers. Fine print, misunderstandings, and lousy guidance have caused many borrowers to lose years of progress toward student loan forgiveness.

In early 2024, the Department of Education will update the counts for federal borrowers. Time on the wrong repayment plan, and some forbearances and deferments, will now count towards IDR forgiveness. For many borrowers, this will bring student loan forgiveness years earlier.

In most cases, no action will be necessary to benefit from this one-time update. However, some borrowers may need to act before the December 31, 2023, deadline to take advantage of this program.

Significant Changes Coming to Bankruptcy

Historically speaking, discharging federal student loans has been difficult or nearly impossible, depending on who you ask.

Last month, the Biden administration announced some major changes to how they would handle federal student loans in bankruptcy. These changes will make it significantly easier for many borrowers to get the financial fresh start promised by bankruptcy.

The changes took effect in November of 2022, but bankruptcy attorneys are still digesting the changes and getting trained on the update. Expect record numbers of borrowers to get student loans discharged in bankruptcy in 2023.

For the first time, many borrowers overwhelmed by federal debt may avoid a student loan life sentence.

The Payment and Interest Pause Continues

Though it seemed that the federal student loan payment and interest pause was certain to end on January 1, 2023, borrowers received yet another extension.

There isn’t a set end date for the student loan relief this time. It will depend on when the Supreme Court makes a final ruling on the one-time forgiveness plan. The most likely outcome is that federal borrowers won’t have to make a payment until September 2023.

Borrowers can use this time to build up their emergency fund and prepare to attack their student debt when repayment restarts. With many savings accounts currently paying meaningful interest rates, it presents a rare opportunity for borrowers to get interest working for them instead of against them.

Sherpa Tip: If you previously made payments towards your federal student loans, it isn’t too late to ask for a refund. Getting a refund now can mean earning money on interest and potentially getting more debt forgiven in the future.

A Final Decision on One-Time Forgiveness

When it was announced that federal borrowers would receive up to $20,000 of forgiveness, it triggered a wave of court challenges.

2023 could become the year that forgiveness actually happens. The Supreme Court will hear the case at the end of February, with a final decision to be issued later in the year.

Should the Biden administration prevail in court, most federal borrowers will see $10,000 to $20,000 disappear from their loan balances.

The Unveiling of a New Repayment Plan

Among the many changes announced in 2022, details were released on a new income-driven repayment plan.

We still don’t have the full details, but many IDR borrowers could see their monthly payments cut in half. Student loan interest relief could also enter the equation for many.

Who the new plan helps and how many benefit is still unknown, but 2023 could become the year IDR repayment becomes more affordable for millions of Americans.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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