The Education Department announced a one-time waiver that’s expected to push more than 3 million student loan borrowers closer to forgiveness through income-driven repayment. Here’s what you need to know about this week’s news and how it could impact your student loans.
1 current trend within student loans for the week of April 25, 2022
1. One-time income-driven repayment waiver will impact millions of borrowers
Last week, the Biden administration announced a one-time income-driven repayment (IDR) waiver that’s expected to impact more than 3 million federal student loan borrowers and grant roughly 40,000 immediate student loan cancellation.
Income-driven repayment plans are federal payment plans designed to make borrowers’ monthly payments more manageable. Payments are based off of annual income and family size, and after 20 or 25 years of payments, the remaining balance is forgiven.
Much like other federal relief programs, IDR has been criticized by borrowers and lawmakers for not meeting its promise of forgiveness — which is largely the result of servicers mismanaging the program and not adequately counting payments. This most recent action by the Education Department will more strictly oversee servicers that have steered borrowers into expensive forbearance periods rather than IDR, and it will also work to establish better systems for tracking payment progress.
How this affects student loans
The Education Department estimates that the waiver will automatically bring millions of borrowers progress toward IDR or Public Service Loan Forgiveness (PSLF).
- At least 40,000 borrowers are expected to receive immediate student loan cancellation through 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 through IDR.
Those impacted by the waiver will likely see these changes reflected in their accounts in late 2022 and don’t need to do anything to qualify.
Here’s how you can get prepared
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. During 2022, 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.