In the ever-changing world of student loans, staying on top of current events and student loan rates is critical. Below are this week’s student loan trends that could affect your loans — and your wallet.
2 current trends within student loans for the week of April 12, 2021
1. President Biden proposes $400 increase to maximum Pell Grant amount and eligibility for DACA recipients
On April 9, President Joe Biden proposed an additional $3 billion dollars in Department of Education funding for federal Pell Grants. This would increase the maximum Pell Grant value by $400 each year, marking this as the biggest one-time annual increase to the program since 2009. He also proposed making Pell Grants available to DACA recipients, also known as “Dreamers.” Dreamers currently do not have access to any federal financial aid.
The Pell Grant program is a federal relief program that provides need-based student loan grants to undergraduate students who qualify as low-income. In certain cases, students enrolled in postbaccalaureate teacher certification may also qualify if they meet the required criteria.
As of now, the maximum Pell Grant award is $6,495 for the 2021-22 school year. To apply, students must submit a Free Application for Federal Student Aid (FAFSA) form. How much a student will receive depends on a few factors, including the family’s Expected Family Contribution (EFC), the estimated cost of attendance (COA) and the student’s enrollment status. In certain situations, students may qualify to receive up to 150 percent of their Pell Grant award for that specific academic aid year.
How this affects student loans
Biden’s request to increase Pell Grant funding could provide an extra $400 per academic year to those who qualify, a move that would impact low- and middle-income borrowers the most. This would also be a significant step toward Biden’s campaign proposal to double the value of Pell Grants.
Additionally, this would impact DACA recipients, who have never qualified for federal funding. If Biden’s budget revisions pass, DACA recipients could find it easier to pay for college in coming years.
2. Illinois program provides up to $40,000 in student loan debt assistance to help borrowers buy homes
The Illinois Housing Development Authority (IDHA) has developed the SmartBuy program, which pays off student loan debt equal to up to 15 percent of a home’s purchase price (maximum $40,000) for homebuyers in Illinois.
Borrowers must meet certain requirements to qualify, including:
- A minimum of $1,000 in student loan debt from an eligible institution, with the loans in their name.
- A maximum of $40,000 in student loan debt or an amount equal to 15 percent of the home’s purchase price, whichever is less.
- Home purchased as a primary residence in Illinois.
- A credit score of at least 640.
- A debt-to-income ratio of no more than 45 percent.
- A home purchase within income and purchase price limits.
As stated on the site, the IDHA has instated this program “to provide further opportunity to increase generational wealth and build homeownership accessibility.” Between 600 and 1,000 homebuyers are expected to receive assistance from the program.
How this affects student loans
A Bankrate survey found that approximately 23 percent of U.S. adults have delayed buying a house due to their student loan debt. Programs like SmartBuy could help borrowers reach those major financial milestones sooner.
Keep in mind that SmartBuy won’t work for everyone; only Illinois residents qualify, and if you have more student loan debt than SmartBuy covers, you won’t be eligible for any debt assistance unless you cover the difference in a lump-sum payment. In other words, if you have $60,000 in student loan debt, SmartBuy could cover up to $40,000, but you’d have to pay the remaining $20,000 at closing.
If you believe that you qualify for this program, contact an approved lender or visit the SmartBuy website.
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. As 2021 continues, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.