5 Huge Changes To Student Loans

5 Huge Changes To Student Loans

Here are 5 huge changes to student loans, but 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 regarding student loans, there is good news on the horizon for student loan borrowers. Biden has committed to fixing student loans, including changes to student loan forgiveness and student loan repayment. In some cases, details remain sparse. However, in other instances, there is a clear path to welcomed improvements. Here are 5 huge changes to student loans that you can expect soon:

1. Student loan forgiveness: more borrowers will qualify

Biden has canceled $25 billion of student loans since becoming president. While Biden has focused on targeted student loan cancellation, he has committed to ensuring that more student loan borrowers can get access to student loan forgiveness. Who are the big winners from potential wide-scale student loan forgiveness? For example, Biden has forgiven record student loan debt for public servants, borrowers with a permanent disability and borrowers who were misled by their college or university. All of these federal programs currently are active, and you can apply for student loan forgiveness directly online with help from your student loan servicer. Importantly, millions of student loan borrowers are eager to know whether Biden will enact wide-scale student loan forgiveness. While there is no guarantee, the most likely outcome is $10,000 of student loan forgiveness. That said, progressive Democrats in Congress are pushing Biden to cancel up to $50,000 of student loans for borrowers. Given rising inflation and the potential for huge losses for Democrats in the upcoming midterm election, Biden could decide not to cancel student loans for all federal borrowers.

2. Biden is fixing public service loan forgiveness

Biden is making it easier for public servants to get student loan forgiveness. Currently, there are 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 can qualify for public service loan forgiveness so long as they meet the requirements. Public service loan forgiveness is one of the best ways to get student loan forgiveness, and all your federal student loans can get canceled after 120 monthly student loan payments. Biden’s biggest change is allowing student loan borrowers to get a limited waiver for student loan forgiveness. This game-changer is available through October 31, 2022 and enables student loan borrowers to count prior student loan payments that previously were 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 loan borrowers can qualify for student loan forgiveness more easily and get student loan forgiveness faster.

3. Student loan repayment could be simplified

Biden could simplify student loan repayment to help more student loan borrowers pay off student loans faster. Currently, there are four major income-driven repayment plans for federal student loan borrowers. This includes Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR). The Biden administration is evaluating options for student loan repayment through the rulemaking process. Potential changes include automatic enrollment in income-driven repayment, simplifying the number of payment plans, and shortening the amount of time to get student loan forgiveness. For example, student loan borrowers can get student loan forgiveness after 20 years (undergraduate student loans) or 25 years (graduate student loan borrowers). Biden could seek to shorten those time frames so that more borrowers can qualify earlier for student loan forgiveness.


4. Student loans could be discharged in bankruptcy

There is bipartisan support in Congress to allow more student loans to be discharged in 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 FRESH START Through Bankruptcy Act of 2021, which would help more student loan borrowers get access to student loan cancellation. Under their proposed bill, student loan borrowers who are struggling financially could get student loan cancellation for their federal student loans through bankruptcy. To qualify, they’ll need to wait ten years from the date their first federal student loan is due. For borrowers who don’t wait 10 years, student loan borrowers with private and federal student loans also can access student loan discharge through bankruptcy under the existing “undue hardship” legal standard. While Biden has primarily focused on student loan cancellation, Biden could shift his focus to building a bipartisan coalition to help more student loan borrowers get student loan forgiveness through bankruptcy.

5. Biden could extend the student loan payment pause again

Biden could extend the student loan payment pause again. Currently, temporary student loan relief ends on August 31, 2022. Biden and President Donald Trump collectively extended student loan relief six times. If Biden extends student loan relief beyond August 31, this would be an unprecedented seventh extension. Student loan payments for federal student loans have been paused since March 2020, meaning student loan borrowers haven’t been required to make a single federal student loan payment during the entire Biden administration. U.S. Secretary of Education Miguel Cardona, when testifying on Capitol Hill, didn’t confirm or deny whether student loan payments will restart on September 1. This has led to speculation that Biden potentially could extend student loan relief. Cardona confirmed that if Biden ends the student loan moratorium, student loan borrowers will get “ample notice” before student loan payments restart.

Student loans: next steps

When it comes to improving student loans, there could be more changes on the horizon. Top of mind is wide-scale student loan cancellation and whether Biden will cancel $10,000 of student loans, $50,000 or another amount. That said, there are multiple other changes that student loan borrowers can expect that will improve student loan repayment and student loan forgiveness. Expect the Education Department to provide more details as the Biden administration finalizes these potential changes. Importantly, borrowers should focus on student loan payments, which could start as early as September 1, 2022. Here are some popular ways to pay off student loans and save money:

Student Loans: Related Reading

9 million borrowers now qualify for student loan forgiveness

Senators propose major changes to student loan forgiveness

Education Department announces major overhaul of student loan servicing

Navient agrees to cancel $3.5 million of student loans


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