After announcing its student loan forgiveness plan in August of 2022, the Biden administration got hit with a series of lawsuits that led to a temporary halt on mass cancellation. Fast-forward six months later, the Supreme Court held its first hearing on the matter and is expected to deliver a final decision by June.

However, as skepticism grows among conservative justices regarding Biden’s and the Department of Education’s legal authority to greenlight such a plan, mass student loan cancellation is at risk of being blocked. This, in turn, could put roughly 20 million borrowers at risk of defaulting on their loans, according to a recent report by the Consumer Financial Protection Bureau (CFPB).

Who is at risk if the Supreme Court blocks Biden’s student loan forgiveness plan

The CFPB recently analyzed the credit records of 34 million student loan borrowers (about 80 percent), to determine their financial readiness to begin making payments once deferment ends. To do this, the agency focused on identifying five risk factors among borrowers’ credit records:

  • Pre-pandemic delinquencies on student loans
  • Pre-pandemic payment assistance on student loans
  • Presence of multiple student loan servicers
  • History of delinquencies on other credit products since the start of the pandemic
  • New third-party collections during the pandemic

These factors were chosen because they directly involve borrowers’ interactions with their student loan servicers and can serve as an indicator of ongoing risks, even while payments are paused.

The CFPB found that as many as 15 million borrowers had at least one of the risk factors mentioned, while five million had at least two. The agency also noted that while “riskier borrowers” are spread amongst different demographic groups, there’s a higher number of them concentrated in low-income, high-minority neighborhoods. This checks out, as both women and BIPOC borrowers tend to struggle more with their student loan payments due to existing gender and racial wealth gaps.

Likewise, borrowers between the ages of 30 and 49 are more likely to struggle when payments resume, as they have more financial obligations compared to older borrowers.

Another group that’s at risk are those who took on more debt during the pandemic, driven by financial need. According to the report, 39 percent of borrowers now have minimum payments on non-student loan accounts that are at least 10 percent higher than in March of 2020. This, coupled with the fact that some are still struggling financially, could result in an increase in student loan default rates, as it is unclear whether they will be able to handle the financial burden without assistance.

When does student loan deferment end?

Federal student loans have been on an interest-free forbearance for almost three years, however, borrowers are set to resume payments no later than this summer. According to the Department of Education, federal student loan payments will restart 60 days after the current litigation with the Supreme Court is resolved or 60 days after June 30, 2023  — whichever comes first.

How to prepare for when student loan payments resume

Although mass student debt cancellation is still on the table, it’s not guaranteed until the Supreme Court says otherwise. In the meantime, follow these steps to avoid any unpleasant surprises once payments resume:

  • Update your contact information. You can do this by logging into your servicer’s account or by logging into your FSA account. Having your information up-to-date will ensure you don’t miss out on any important communications regarding your student loans.
  • Look up your payment amount and due date. This is especially important if you graduated during the pandemic and have never made a payment to your student loan account. Checking out your minimum payment due in addition to your future deadline will help you budget for when payments resume. You can find this information by contacting your student loan servicer or logging into your student loan account.
  • Apply for an income-driven repayment plan. If after checking your payment amount you find it’s too high, you can always apply for an income-driven repayment plan by logging into your FSA account. This will cap your student loan payments to between 10 and 20 percent of your discretionary income, making payments more manageable.
  • Consolidate. If you have multiple student loans with different servicers, consolidating your loans can make them more easy to manage, as you will only have to worry about making one payment each month. Consolidating your loans can also reduce your monthly payment by extending the life of your loan. However, this will result in more interest paid over time, so that’s something to keep in mind.