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There may be major changes to student loan forgiveness this week.

This is what you need to know: and what it means for your student loans.

Student loans

As first reported by NPR, the U.S. Department of Education is expected to announce a major review of the public service loan forgiveness program this week. The program, which helps public officials get student loan write-offs for their federal student loans, has been plagued by claims of mismanagement, low approval rates, and widespread confusion among student loan borrowers. The main changes are expected to include two main approaches:

  1. Simplify student loan forgiveness: Simplify long-term student loan forgiveness through the federal rulemaking process; and
  2. More student loan forgiveness: Use executive action to make it easier for student loan borrowers to obtain student loan forgiveness by relaxing rules and requirements. retroactively.

Student Loans: Problems With Student Loan Forgiveness

Since Congress created Public Service Loan Forgiveness in 2007, the program has faced numerous challenges that have created confusion among student loan borrowers, including:

  • what student loan payments count toward student loan forgiveness;
  • which types of student loans must count toward student loan forgiveness;
  • what employers qualify for student loan forgiveness;
  • when student loan payments start counting for student loan forgiveness;

Getting student loan forgiveness is not as simple as saying you “work in public service” or that you did it for 10 years. Student loan borrowers must work full time (at least 30 hours per week) for a qualified public service or non-profit employer, enroll in a qualified student loan repayment plan, make 120 monthly payments of student loans and make at least most of those student loan payments while enrolled in an income-based repayment plan. (Student loan forgiveness won’t be available to everyone, but this plan is available now.) With a 98% rejection rate, many student loan borrowers seeking public service loan forgiveness and drowning in student loan debt have invested 10 years of public service and still haven’t been able to obtain the loan. student loan forgiveness. (Here’s how to get student loan forgiveness.)


Student Loan Cancellation: Major Changes

According to NPR, the Department of Education will implement the following important changes:

1. Count Past Student Loan Payments for Student Loan Forgiveness

If you had previous student loan payments that you made for student loan forgiveness, but they did not count, it is now possible that these payments Will tell. To count past student loan payments, student loan borrowers must apply for public service loan forgiveness by October 31, 2022.


2. Count past student loan payments made for FFELP loans

This is one of the biggest problems with student loan forgiveness. If the Department of Education changes this rule, there could be student loan relief for these borrowers who have struggled for years. (Here are 17 ways Biden can arrange student loan forgiveness.) Before 2010, FFELP student loans were issued by financial institutions (not the US Department of Education) as federal student loans. Historically, borrowers with these student loans have struggled to include them in student loan forgiveness because the public service loan forgiveness program only applies to Direct Loan Program loans such as Stafford loans. Although student loan borrowers with FFELP Loans can consolidate FFELP Loans into a Direct Consolidation Loan, their previous FFELP Loan payments did not count toward the required 120 monthly payments. In effect, these student loan borrowers had to start over after consolidating into a Direct Loan Program, even if they made 100 monthly payments, for example. Now the Department of Education can drop this rule and count past student loan payments, even for FFELP loans. If the Department of Education implements this rule change, it could be a game changer for student loan forgiveness.


3. Get credit for student loan forgiveness if you used the wrong student loan repayment plan

Some borrowers do not realize that only certain student loan repayment plans are eligible for public service loan forgiveness. For example, income-based repayment plans, such as IBR or REPAYE, are two examples of eligible student loan repayment plans. A new rule change would grant payment credit to any student loan borrower who makes student loan payments through an ineligible student loan payment plan.


4. Student loan payments made prior to student loan consolidation also count

Similar to the problem with FFELP loans, some student loan borrowers decided to consolidate their federal student loans while seeking student loan forgiveness. The problem with this strategy is that your student loan payments made prior to student loan consolidation may not count toward the required 120 monthly student loan payments. Under the rule change, previous student loan payments made prior to student loan consolidation will now count toward required student loan payments.


5. Members of the military can count past student loan payments while on active duty.

During all months spent on active duty, members of the military can receive credit for student loan payments, even if their student loan payments were a temporary suspension or deferral of student loans.


6. Student loan forgiveness can also relax in these areas

In the long term, the Department of Education could relax certain rules, including:

  • broadening the definition of “public service” to qualify more student loan borrowers;
  • provide “credit” for payments, even if student loan borrowers failed to make student loan payments due to forbearance, deferment, or other financial hardship;
  • create a formal process for student loan borrowers who are turned down for student loan forgiveness to appeal their decision and correct any errors; and
  • grant credit for student loan payments to student loan borrowers who paid late or in installments.

Student Loan Forgiveness: Final Thoughts

Student loans are changing, and this focus on student loan forgiveness is another example. This news follows this week’s surprise announcement that Navient will stop servicing federal student loans. (Here’s why Navient gave up its student loans.) Until the Department of Education publishes formal changes or recommendations for student loan forgiveness, these changes may not be implemented. If the Department of Education implements these or other changes, wait for the Department of Education or student loan servicer to provide more details. It’s clear that President Joe Biden is focused on improving student loan forgiveness and simplifying student loan repayments so more student loan borrowers can get financial relief. The Department of Education, led by Secretary Miguel Cardona, has held hearings and solicited public comment for comment on student loan forgiveness. The collective results of these efforts could help frame the future of student loan forgiveness. In addition to executive action, student loan forgiveness has become a focus of attention in Congress, even if Congress has not passed any large-scale student loan forgiveness legislation. It is also possible that Congress will act independently of the Biden administration to provide additional student loan relief for student loan borrowers.

Remember, there are several ways to pay off student loans. If student loan forgiveness is in your future, make sure you understand all of your options for your student loans. Here are some popular ways to save money on your student loans:


Student Loans: Related Reading

Getting Approved for Student Loan Forgiveness

Student loan forgiveness will not be available to these borrowers

Student loan forgiveness won’t be available to everyone, but this plan is available now

How to get student loan forgiveness

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