As the Biden administration waits to make a final decision on federal student loans, Republicans have proposed a new bill that would reform key aspects of the federal student loan system but also block any possibility of mass debt cancellation. Here’s what to know about this week’s student loan trends and how they may affect you.
1 current trend within student loans for the week of Aug. 15, 2022
1. House Republicans introduce bill to reform federal student loan system
On Aug. 3, House Republicans introduced the Responsible Education Assistance through Loan (REAL) Reforms Act, which would reform key aspects of the current student loan system. Notably, the bill would eliminate certain existing student loan forgiveness programs and expand Pell Grant access.
Here are the key proposals in the bill:
- Consolidate income-driven repayment to a single plan, which would no longer forgive remaining loan balances at the end of the plan. Instead, borrowers would make income-based payments ($25 minimum) until they have repaid the equivalent of a standard repayment plan, though interest would stop accruing after 10 years.
- Limit graduate borrowers to $25,000 annually and $100,000 aggregate in federal student loans.
- Eliminate the grad PLUS loan program.
- Give schools the authority to limit how much students can borrow under certain circumstances.
- Eliminate the Public Service Loan Forgiveness program for new borrowers.
- Expand Pell Grant access to short-term programs, such as those offered by vocational or technical schools.
- Prohibit the Education Department or the president from wiping out student debt or making further changes to student loan policy that would increase government costs.
How this affect student loans
The bill could go into effect as soon as next year if Republicans take control of the U.S. House, as recent polls suggest. However, nothing about the bill is certain yet.
For borrowers, the result of the bill is a mixed bag. Parts of the bill, such as the limit on graduate borrowing, are intended to rein in the long-term costs of an education, and the expansion of the Pell Grant program could help students who are pursuing workforce programs. On the other hand, the elimination of the PSLF program and the reforms to income-driven repayment could make it harder for low-income borrowers to get out from under their balances in a timely manner.
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.