President Joe Biden’s plan to forgive up to $20,000 in federal student loan debt per borrower could soon reach endgame if the U.S. Supreme Court rules against the plan this month, as many predict. If the plan is struck down, at least one legal expert says bankruptcy might be the only option for many borrowers.
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The reason is simple: Many borrowers won’t have enough funds when federal student loan payments resume sometime this summer following a pause of more than three years.
About 20% of student loan borrowers have already defaulted on a loan, according to Jonathan Petts, CEO of Upsolve, a non-profit organization that helps individuals file bankruptcy without using a private attorney. The total amount already in default is more than $124 billion.
“This demonstrates a clear need for a plan to help borrowers facing challenges with paying off their debts,” Petts told GOBankingRates in an email.
He said the Biden forgiveness plan is “likely to be struck down” by the SCOTUS, which means both loan payments and interest will resume not too long