The Department for Education has announced a one-time waiver that is expected to bring more than 3 million student loan borrowers closer to forgiveness through income-based repayment. Here’s what you need to know about this week’s news and its impact on your student loans.
1 current student loan trend for the week of April 25, 2022
1. One-time income-based repayment holiday will impact millions of borrowers
Last week, the Biden administration announced a one-time income-contingent repayment (IDR) waiver that is expected to impact more than 3 million federal student loan borrowers and grant about 40,000 immediate student loan forgiveness.
Income-Based Repayment Plans are federal payment plans designed to make borrowers’ monthly payments more manageable. Payments are based on annual income and family size, and after 20 or 25 years of payments, the remaining balance is forgiven.
Like other federal relief programs, the IDR has been criticized by borrowers and lawmakers for failing to deliver on its promise of forgiveness — largely the result of the program’s mismanagement by government departments and agencies. because they do not record payments correctly. This most recent action by the Department of Education will more strictly oversee services that have referred borrowers to expensive forbearance periods rather than IDR, and it will also establish better systems for monitoring the progress of payments.
How it affects student loans
The Ministry of Education estimates that the waiver will automatically progress millions of borrowers to IDR or Public Service Loan Forgiveness (PSLF).
- At least 40,000 borrowers are expected to receive immediate student loan forgiveness through the PSLF.
- More than 3.6 million borrowers are expected to receive at least three years of additional IDR payment credit.
- Several thousand borrowers with older student loans are expected to receive immediate student loan cancellation via IDR.
Those affected by the waiver will likely see these changes reflected in their accounts at the end of 2022 and will not need to do anything to qualify.
Take away key
The Biden administration has announced a one-time student loan forgiveness waiver that is expected to impact millions of borrowers.
Here’s how you can prepare
Whether you’re new to student loans or in the process of repaying, it’s wise to stay informed about how your student loan rates might change. In 2022, more opportunities for cheaper loans or loan forgiveness may open up; keep an eye on the Bankrate student loan news hub for the latest trends.