Here are 5 big student loan changes, but details remain unclear.
Here’s what you need to know – and what it means for your student loans.
As President Joe Biden decides his next move on student loans, there is good news on the horizon for student loan borrowers. Biden has committed to repairing student loans, including changes to student loan forgiveness and student loan repayments. In some cases, details remain sparse. In other cases, however, there is a clear path to welcome improvement. Here are 5 big student loan changes you can expect soon:
1. Student Loan Forgiveness: More borrowers will qualify
Biden has forfeited $25 billion in student loans since taking office. While Biden has focused on targeted student loan cancellations, he has committed to making sure more student loan borrowers have access to student loan forgiveness. Who Are the Big Winners of a Possible Widespread Student Loan Forgiveness? Biden, for example, has forgiven record student loan debt for government employees, borrowers with a permanent disability, and borrowers misled by their college or university. All of these federal programs are currently active, and you can apply for student loan forgiveness directly online with the help of your student loan administrator. Importantly, millions of student loan borrowers are eager to see if Biden will enact a sweeping student loan forgiveness. Although there are no guarantees, the most likely outcome is a $10,000 student loan forgiveness. However, progressive Democrats in Congress are pushing Biden to call off up to $50,000 in student loans to borrowers. With inflation rising and the potential for huge losses for Democrats in the upcoming midterm elections, Biden may decide not to call student loans for all federal borrowers.
2. Biden regulates government loan forgiveness
Biden is making it easier for public employees to forgive student loans. There are currently 9 million student loan borrowers who qualify for student loan forgiveness. To date, Biden has canceled $7.3 billion for more than 127,000 student loan borrowers through public service loan forgiveness. Any federal student loan borrower may qualify for government loan forgiveness as long as they meet the requirements. Government loan forgiveness is one of the best ways to get student loan forgiveness, and all of your federal student loans can be canceled after 120 monthly student loan payments. Biden’s biggest change is that student loan borrowers will get a limited waiver of student loan forgiveness. Available through October 31, 2022, this game changer allows student loan borrowers to count past student loan payments that were previously considered ineligible for student loan forgiveness. Examples include late student loan payments, partial student loan payments, or student loan payments made under the wrong amortization schedule. The net effect: Student loan borrowers can more easily qualify for student loan forgiveness and receive student loan forgiveness more quickly.
3. Student loan repayment could be simplified
Biden could simplify student loan repayments to help more student loan borrowers repay student loans faster. There are currently four major income-tested repayment plans available to federal student loan borrowers. These include Income-Contingent Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR). The Biden administration is evaluating student loan repayment options as part of the rulemaking process. Potential changes include automatic enrollment in income-based repayment, simplifying the number of payment plans, and reducing the time to student loan forgiveness. For example, student loan borrowers may receive student loan forgiveness after 20 years (undergraduate student loans) or 25 years (graduate student loan borrowers). Biden could look to shorten those periods so more borrowers can qualify for student loan forgiveness sooner.
4. Student loans could be discharged in bankruptcy
There is bipartisan support in Congress to allow more student loans to be redeemed in bankruptcy. For example, Sen. Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, and Sen. John Cornyn (R-TX), Member of the Senate Judiciary Committee, presented the RESTART by Bankruptcy Act of 2021, which would help more student loan borrowers gain access to student loan termination. Under their bill, student loan borrowers who experience financial difficulties could receive a student loan foreclosure on their federal student loans through bankruptcy. To qualify, they must wait ten years from the due date of their first government student loan. For borrowers who do not wait 10 years, student loan borrowers with private and state student loans can also access the student loan exemption through bankruptcy under the existing “unfair hardship” legal standard. While Biden has primarily focused on foreclosures on student loans, Biden may shift his focus to building a bipartisan coalition to help more student-loan borrowers obtain student-loan forgiveness through bankruptcy.
5. Biden could extend student loan payment pause again
Biden could extend student loan payment pause again. Currently, the temporary student loan exemption ends on August 31, 2022. Biden and President Donald Trump jointly extended the student loan exemption six times. If Biden extends student loan easing past Aug. 31, it would be an unprecedented seventh extension. Student loan payments for federal student loans have been on hold since March 2020, meaning student loan borrowers have not had to make a single federal student loan payment throughout the Biden administration. US Secretary of Education Miguel Cardona testified on Capitol Hill, neither confirming nor denying whether student loan payments will resume on September 1. This has fueled speculation that Biden could potentially extend student loan relief. Cardona confirmed that if Biden ends the student loan moratorium, student loan borrowers will be given “reasonable notice” before student loan payments resume.
Student loans: next steps
When it comes to improving student loans, more changes could be on the horizon. The focus is on large-scale student loan cancellations and whether Biden will cancel $10,000 in student loans, $50,000 or some other amount. However, there are several other changes student loan borrowers can expect that will improve student loan repayment and student loan forgiveness. Expect the Department of Education to provide more details as the Biden administration finalizes these potential changes. Importantly, borrowers should focus on student loan payments, which could begin as early as September 1, 2022. Here are some popular ways to pay off student loans and save money: