President Joe Biden will delay his new student loan plan.
Here’s what you need to know – and what it means for your student loans.
According to a report from Business Insider, the U.S. Department of Education will delay releasing a new earnings-related repayment for your student loans. Student loan borrowers hoped to learn about a new income-based repayment plan this month that could save them money. This announcement ties in with three major student loan announcements that Biden could make within weeks. However, the Department of Education says the new plan will not be finalized in the final rulemaking, which will be available by November 1. Instead, the income-based repayment plan may not be available until at least July 1, 2023.
“Failed to provide a completed [income-driven repayment] Rule by November 1 means borrowers will either have to wait another year for the promise of a truly affordable repayment option or risk their financial well-being as the department and its service providers – with their history of incompetence and abuse – rush to find a implement another repayment plan,” Persis Yu of the Student Borrower Protection Center told Business Insider.
Student Loan Forgiveness: New Plan
Biden has said he wants to improve student loan forgiveness so more student borrowers can qualify. That includes a possible student loan cancellation announcement by the end of August. Currently, student loan borrowers can lower their monthly federal student loan payments through an income-controlled repayment plan such as IBR, PAYE, REPAYE, and ICR. After 20 years (undergraduate student loans) or 25 years (graduate student loans), student loan loans can be forgiven for their remaining student loan. The Biden administration has not released details about the new student loan plan or how it might make student loan repayments easier. In income-based repayment plans, student loan borrowers make a monthly student loan payment based on their discretionary income and family size. The goal is to make student loan payments more affordable while also enabling student loan forgiveness.
According to a report last month, 9 million student loan borrowers are eligible for student loan forgiveness. However, fewer than 150,000 student borrowers Received student loan forgiveness through government loan forgiveness. The Student Borrower Protection Center found that fewer than 15% of the 9 million government workers with student loan debt have filed records to track their student loan forgiveness progress. In addition, the government loan forgiveness program has canceled student loan debt for only 130,730 student loan borrowers, which accounts for less than 2% of the eligible population. Sometimes this means that 98% of eligible student loan borrowers have the opportunity to receive a student loan forgiveness.
Biden proposes making the limited waiver on student loan forgiveness permanent
Biden has proposed major changes to student loan forgiveness, including a temporary, limited waiver. Among other benefits, student loan borrowers may “count” previously ineligible student loan payments toward student loan forgiveness, including late and partial payments and payments made under the incorrect student loan repayment schedule. Earlier this month, Biden proposed making the limited waiver on student loan forgiveness permanent. Without this proposed extension, student loan borrowers have until October 31, 2022 to request the limited waiver. The extension of the limited waiver will benefit all federal student loan borrowers, including Perkins Loan and FFELP Loan borrowers, and student loan borrowers who made student loan payments while serving in the military. Without a new, simpler income-based repayment schedule, some student loan borrowers have expressed concerns about resuming student loan payments. The combination of student loan payments and no foreclosure — coupled with no new income-based repayment plan — could become a nightmare scenario for borrowers. The student loan payment pause is scheduled to end on August 31, 2022, meaning student loan borrowers will resume federal student loan payments for the first time in two and a half years. The good news is that you have several weeks to prepare for the end of the student loan deferral. Here are some popular ways to prepare for restarting student loan payments: