5 Huge Changes to Student Loans, But Details Remain Unclear

Here are 5 huge changes to student loans, but the details remain unclear.

Here’s what you need to know — and what it means for your student loans.

Student loans

As President Joe Biden decides his next move on student loans, good news is on the horizon for student borrowers. Biden has pledged to fix student loans, including changes to student loan forgiveness and student loan repayment. In some cases, details remain scarce. However, in other cases, there is a clear path to welcome improvements. Here are 5 huge student loan changes you can expect soon:

1. Student Loan Forgiveness: More Borrowers Will Qualify

Biden has forgiven $25 billion in student loans since becoming president. While Biden has focused on targeted student loan forgiveness, he has pledged to ensure that more student borrowers can have access to student loan forgiveness. Who are the big winners from a potential large-scale student loan forgiveness? For example, Biden wrote off record student loan debt for public servants, borrowers with permanent disabilities, 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 officer. Importantly, millions of student borrowers are eager to hear whether Biden will embrace large-scale student loan forgiveness. Although there are no guarantees, the most likely outcome is $10,000 in student loan forgiveness. That said, progressive Democrats in Congress are pushing Biden to forgive up to $50,000 in student loans for borrowers. Given rising inflation and the potential for huge losses for Democrats in the upcoming midterm elections, Biden may decide not to cancel student loans for all federal borrowers.


2. Biden sets the cancellation of public service loans

Biden makes it easier for officials to get student loan forgiveness. Currently, there are 9 million student borrowers who qualify for student loan forgiveness. To date, Biden has canceled $7.3 billion for more than 127,000 student borrowers through the cancellation of public service loans. Any federal student loan borrower may be eligible for government loan forgiveness as long as they meet the requirements. Public Service Loan Forgiveness is one of the best ways to get student loan forgiveness, and all of your federal student loans can be forgiven after 120 monthly student loan payments. Biden’s biggest change is allowing student borrowers to get a limited waiver for student loan forgiveness. This game changer is available until October 31, 2022 and allows student loan borrowers to count past student loan payments that were previously deemed ineligible for student loan forgiveness. This includes, for example, late student loan payments, partial student loan payments, or any student loan payments made under the wrong repayment plan. The net effect: Student borrowers can more easily qualify for student loan forgiveness and get student loan forgiveness faster.


3. Student loan repayment could be simplified

Biden could simplify student loan repayment to help more student borrowers pay off their student loans faster. Currently, there are four main income-based repayment plans for federal borrowers. This includes Income Based Reimbursement (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income Based Reimbursement (ICR) . The Biden administration is weighing student loan repayment options through the rulemaking process. Potential changes include automatically enrolling for income-contingent repayment, simplifying the number of payment plans, and shortening the time to get student loan forgiveness. For example, student borrowers can get student loan forgiveness after 20 years (undergraduate student loans) or 25 years (graduate student borrowers). Biden could seek to shorten those timelines so more borrowers can qualify for student loan forgiveness sooner.


4. Student loans could be canceled in the event of bankruptcy

There is bipartisan support in Congress to allow more student loans to be released in the event of bankruptcy. For example, Sen. Dick Durbin (D-IL), who chairs the Senate Judiciary Committee, and Sen. John Cornyn (R-TX), a member of the Senate Judiciary Committee, introduced the NEW BEGINNING thanks to the bankruptcy law of 2021, which would help more student borrowers access student loan forgiveness. Under their bill, student borrowers who are in financial difficulty could have their federal student loans canceled through bankruptcy. To qualify, they will have to wait ten years from the maturity date of their first federal student loan. For borrowers who do not wait 10 years, student borrowers with private and federal student loans can also access student loan discharge through bankruptcy under the existing legal standard of “undue hardship.” While Biden has primarily focused on canceling student loans, Biden could focus on building a bipartisan coalition to help more student borrowers get student loan forgiveness through bankruptcy.


5. Biden could extend student loan payment break again

Biden could once again extend the student loan payment break. Currently, temporary student loan relief ends August 31, 2022. Biden and President Donald Trump have collectively extended student loan relief six times. If Biden extends student loan relief beyond August 31, it would be an unprecedented seventh extension. Student loan payments for federal student loans have been suspended since March 2020, meaning student borrowers have not been required to make a single federal student loan payment during the entire Biden administration. US Secretary of Education Miguel Cardona, during his testimony on Capitol Hill, neither confirmed nor denied whether student loan repayments would resume on September 1. This has led to speculation that Biden could potentially extend student loan relief. Cardona confirmed that if Biden ends the student loan moratorium, student borrowers will receive “adequate notice” before student loan repayments resume.


Student loans: next steps

When it comes to improving student loans, there may be more changes on the horizon. The priority is large-scale student loan cancellation and whether Biden will cancel $10,000 in student loans, $50,000 or some other amount. That said, student borrowers can expect many other changes that will improve student loan repayment and forgiveness. Expect the Department of Education to provide more details as the Biden administration finalizes these potential changes. It’s important to note that borrowers should focus on student loan repayments, which could begin as early as September 1, 2022. Here are some popular ways to repay student loans and save money:


Student Loans: Related Reading

9 million borrowers are now eligible for student loan forgiveness

Senators propose major changes to student loan forgiveness

Department of Education Announces Major Overhaul of Student Loans Service

Navient agrees to forgive $3.5 million in student loans

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