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Last week, the U.S. Department of Education distributed the final round of HEERF funding to qualifying U.S. schools and universities. Plus, a group of House Democrats proposed a bill that would accelerate forgiveness under the Public Service Loan Forgiveness (PSLF) program. Here’s what you need to know about this week’s student loans trends and how they could impact your balance.
2 current trends within student loans for the week of July 18, 2022
1. Final HEERF funds distributed to select colleges
Last week, the Department of Education distributed the final $198 million in grants through the Higher Education Emergency Relief Fund (HEERF), which was established in 2020 as a way to assist students and universities during the pandemic. This final distribution will go to the 244 U.S. colleges and universities with the greatest unmet need following the financial impact of COVID-19.
Most of the 244 schools that qualified for aid must distribute roughly half of the aid directly to students. These funds can be used by students to help pay for their basic needs, like housing, food and tuition.
How this affects student loans
HEERF grant aid is distributed to students with the greatest financial need, so low-income students may qualify for emergency funding. Students who are struggling to afford basic needs should contact their financial aid office. Every school is distributing HEERF grants differently; some may automatically apply grants, while others require a separate application. Financial aid offices may use information from your Free Application for Federal Student Aid (FAFSA) to determine your financial need and eligibility for HEERF aid.
2. Democrats push for more changes to PSLF program
Last week, several House Democrats proposed the Simplifying and Strengthening PSLF Act of 2022, which would decrease the number of payments required for Public Service Loan Forgiveness (PSLF) and permanently loosen some of the eligibility requirements.
Currently, PSLF forgives student loan balances for public servants who have made 120 qualifying payments while working for an eligible employer, but borrowers must also meet strict requirements for eligible loans and repayment plans. Last October, the Biden administration introduced a temporary waiver that expands the definition of a qualifying payment, allowing thousands of borrowers to make progress toward PSLF. However, this waiver will close on Oct. 31 of this year.
The Simplifying and Strengthening PSLF Act of 2022 proposes making elements of the temporary waiver permanent, as well as making forgiveness available after five years of qualifying payments instead of 10.
How this affects student loans
The biggest benefit from the bill is that it would shorten the repayment timeline by half, making forgiveness more accessible for qualifying borrowers — and it also means that borrowers who have already made at least five years of payments on the plan would likely see immediate forgiveness. It would also make the following reforms permanent:
- Make any period of repayment eligible for PSLF, regardless of federal loan type, repayment plan and payment.
- Clarify eligibility for active-duty military and Peace Corps volunteers whose loans were in default during service.
- Allow parent PLUS loan holders and couples who have previously joint-consolidated FFEL federal loans to reconsolidate their loans into a Direct Loan.
With that said, the bill will have to pass through the House and the Senate, so the likelihood of permanent reform is still up in the air. Borrowers who are interested in taking advantage of the temporary PSLF waiver should sign up soon before the program closes on Oct. 31.
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.