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 June 28, 2021
1. Democratic lawmakers call for extension to the student loan forbearance period
Sen. Elizabeth Warren, Sen. Chuck Schumer, Rep. Ayanna Pressley and Rep. Joe Courtney sent a letter to the Biden administration calling for an extension to the student loan interest and payment pause, which is currently due to expire on Sept. 30, 2021. The letter is signed by dozens of Democratic lawmakers.
In the letter, the lawmakers request that the forbearance period be extended until March 31, 2022, or until the economy reaches prepandemic employment levels, whichever is longer. They argue that even as the economy begins to improve, the extension is necessary for borrowers who have been most impacted over the last year: “Women and people of color have been disproportionately harmed by the pandemic, which some experts have deemed ‘the most unequal recession in modern U.S. history,’ and they have recovered at a slower rate.”
The rescheduled payments in October would cause a significant and unnecessary drag to the economy, they write, since the possible wave of defaulted federal student loans would cause long-term credit damage and harm borrowers’ financial health. While the government does provide repayment alternatives, like income-driven repayment plans, the letter criticizes these plans’ accessibility, claiming that the enrollment process is lengthy and complex and that servicers will be overwhelmed by the potential flood of borrowers needing to enroll once the repayment pause ends.
How this affects student loans
The Biden administration is already evaluating the end of administrative forbearance. Education Secretary Miguel Cardona stated in May that an extension would depend on the state of the economy at the time. “[An extension is] not out of the question, but at this point it’s Sept. 30,” he said during an Education Writers Association Conference.
If you’re worried about restarting payments, it’s best to start planning now — and act as if an extension is not coming. You may want to start preparing to apply for an income-driven repayment plan or standard forbearance. In some cases, you could also think about whether it makes sense to refinance your loans with a private lender in order to get a lower monthly payment.
2. U.S. Department of Education holds public hearings on student loan forgiveness programs
The U.S. Department of Education held online public hearings for three days last week, allowing stakeholders to comment on 14 topics relating to student loan forgiveness. Commenters could also make recommendations for how current student loan legislation could be improved.
The hearings specifically sought to address modifications to student loan programs made by the Trump administration. Under that administration, many borrowers had a harder time qualifying for student loan forgiveness through programs like borrower defense to repayment.
These hearings will help shape future rules and regulations for student loans to make it easier for borrowers to qualify for programs like Public Service Loan Forgiveness. Written comments will be accepted by the Department of Education until July 1.
How this affects student loans
Should a consensus be reached after these hearings, the Department of Education could revise regulatory language for student loans. The Biden administration has expressed interest in implementing changes to Public Service Loan Forgiveness, total and permanent disability discharge and more; any adjustments to these programs could help more borrowers qualify for student loan forgiveness.
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.