Did you borrow money to attend a college or university? You probably already know that 2023 was a big year for student loan news. Repayments started for many, and existing loan forgiveness programs received some major updates. Whether you have been paying for years or have your first payment due soon, here's what you should know about meeting your student loan obligations.
Student loan repayments restarted
In June of 2023, the student loan payment pause that took place during the pandemic finally ended. According to the Department of Education, more than 28 million borrowers were scheduled to start making payments again. Of those with October payments due, 60% were able to make them on time.
So, what about the rest? The government has worked on a 12-month "on-ramp," where payments due between now and September 2024 will still need to be paid. However, those missing payments during that time won't be subject to default or collection activity as they may have been for missing payments in the past. The government hopes this gives borrowers a full year to get to know their repayment options, get budgets in check, and fully understand the change in household expenses.
Biden administration expands loan cancellation
In August of 2023, the Supreme Court struck down Biden's earlier loan forgiveness proposal. It would have given amounts of up to $20,000 in debt cancelation for some lower-income students. While this legal decision means most will have to continue paying after all, some groups will see help.
On December 6, 2023, the Biden administration revealed it will cancel almost $5 billion through federal student loan forgiveness programs. It's available just for some students, including the following:
- Students who lost money in certain for-profit colleges
- Borrowers who have paid for at least 20 years through an income-driven repayment program and didn't get credit for all payments
- Public-sector workers with at least 10 years of monthly payments made
Qualified borrowers would have received a notice in November of 2023 about their status in this forgiveness group.
SAVE Plan reduces some existing loan payments
For those not eligible for forgiveness, there's still some good news. The Saving on a Valuable Education (SAVE) Plan may reduce the amount of each monthly payment made on federal student loans. It's an income-driven repayment (IDR) plan that uses income and family size to determine how much you have to pay each month.
Those with lower adjusted gross incomes compared to the federal poverty limits may get an income exemption that lowers the monthly amount or even reduces it to $0. Even with these reduced amounts, you will be considered an on-time payer as long as you continue to pay the amount required.
There's also an interest benefit for those who make their full monthly payment but don't pay enough to cover accrued interest. The federal government will cover the remaining interest amount so that the balance of the loan doesn't grow larger than the original amount borrowed.
New savings options in 2024
According to the federal government, additional repayment benefits will be coming in the summer of 2024. They include the following:
After ten total years of payments, borrowers with an original loan balance of $12,000 or less will have the remaining balance forgiven. For each additional $1,000 borrowed, forgiveness will take place a year later. Students will make payments for no more than 20 years for undergraduate loans and 25 years for graduate loans.
Borrowers who are behind on their loan payments will be enrolled in the IDR plan automatically after 75 days of non-payment. The plan will be selected for you based on which will save the most money.
Other loan forgiveness programs
Currently, there are two programs administered by the federal government that can forgive loans for some borrowers. They include:
- The Teacher Loan Forgiveness (TLF) Program, which may forgive up to $17,500 of direct subsidized and unsubsidized loans or Stafford Loans. Borrowers must teach full-time in a low-income school or educational service agency for at least five years and meet other requirements.
- The Public Service Loan Forgiveness (PSLF) Program, which forgives the remaining balance on direct loans after 120 qualifying monthly payments and while working for an eligible employer. You must work for a government or non-profit organization and see if your employer is in the employer database or have it reviewed.
Those who are totally and permanently disabled may qualify for a discharge of student loans. Perkins, Direct, and Federal Family Education Loans all have a provision for forgiveness in some circumstances.
FAQs
Is my private loan eligible for forgiveness?
Private loans are issued by private lenders and banks and are not part of any federal student loan forgiveness program. Only direct federal loans qualify for the forgiveness and deferment programs offered by the Department of Education.
Will there be loan forgiveness for additional students?
Currently, there is no concrete plan for forgiving additional student loans. Negotiations are taking place to discuss what regulations, if any, could possibly replace the loan forgiveness plan that was previously struck down by the Supreme Court. Until then, borrowers will need to apply for any current programs that may offer some relief.
How can I apply for loan forgiveness?
Borrowers looking to apply for the public service or teaching loan forgiveness programs can do so through the Department of Education's website. There is a form for each program to fill out. Those who may be newly eligible for the latest round of cancellations will have received a notice in the mail. For additional information on program eligibility, visit the student loan website.
How can I take advantage of the SAVE Plan?
If you previously enrolled in an income-driven repayment program, you will receive information on the conversion to the new SAVE Plan. Otherwise, you can visit your loan services for more information on how to get payments that meet your budget and help you save on interest over time.
