Business student

Biden delays new student loan plan

President Joe Biden will delay its new student loan plan.

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

Student loans

According to a Business Insider report, the US Department of Education will delay releasing a new income-based refund for your student loans. Student borrowers were hoping to hear more this month about a new income-focused repayment plan that could save them money. This announcement is tied to 3 major student loan announcements Biden could make in the next few weeks. However, the Ministry of Education says the new plan will not be finalized in the final regulations which will be available by November 1. Instead, the income-based repayment plan might not be available until at least July 1, 2023.

“Failing to deliver a finalized document [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 officers – with their history of incompetence and abuse – rushing to implement yet another reimbursement plan,” Persis Yu of the Student Borrower Protection Center told Business Insider.

Student Loan Forgiveness: New Plan

Biden said he wants to improve student loan forgiveness so more student borrowers can qualify. This includes a potential announcement on the cancellation of student loans by the end of August. Currently, student borrowers can lower their monthly federal student loan payments through an income-driven repayment plan such as IBR, PAYE, REPAYE, and ICR. After 20 years (undergraduate student loans) or 25 years (graduate student loans), student borrowers can get student loan forgiveness for the remaining balance of their student loan. The Biden administration has not released details of the new student loan plan or how it could simplify student loan repayment. With income-driven repayment plans, student borrowers make a monthly student loan payment based on their discretionary income and family size. The goal is to make student loan repayments more affordable while providing student loan forgiveness.

According to a report last month, 9 million student borrowers are eligible for student loan forgiveness. However, less than 150,000 student borrowers received student loan forgiveness through public service loan forgiveness. The Student Borrower Protection Center found that less than 15% of the 9 million public service workers with student loan debt have filed paperwork to track their progress toward canceling their student loan. Additionally, the Civil Service Loan Forgiveness Program canceled student loan debt for just 130,730 student borrowers, or less than 2% of the eligible population. Sometimes this means that 98% of eligible borrowers will have the opportunity to get student loan forgiveness.

Biden proposes making limited student loan forgiveness waiver permanent

Biden has proposed major changes to student loan forgiveness, including a temporary and limited waiver. Among other benefits, student borrowers can “count” previously ineligible student loan payments in student loan forgiveness, including late and partial payments as well as payments made under the wrong student loan repayment plan. Earlier this month, Biden proposed making the limited student loan forgiveness waiver permanent. Without this proposed extension, student borrowers have until October 31, 2022 to apply for the limited waiver. The extension of the limited waiver will benefit all federal student loan borrowers, including borrowers of Perkins loans and FFELP loans as well as student loan borrowers who made student loan repayments during military service. Without a new, simpler, income-focused repayment plan, some student borrowers have expressed concern about restarting student loan repayments. The combination of student loan repayments and no student loan forgiveness — coupled with no new income-driven repayment plan — could become a nightmare scenario for borrowers. The student loan payment pause is scheduled to end on August 31, 2022, which means student borrowers will begin making 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 moratorium. Here are some popular ways to prepare for the restart of student loan repayments:

Student Loans: Related Reading

Cancellation of student loans: Congress proposes 0% interest rates for student loans

Student loans: red, white and blue

Senators propose major changes to student loan forgiveness

Department of Education cancels $6 billion in student loans