New Mexico Gov. Michelle Lujan Grisham recently signed the New Mexico Opportunity Scholarship Act, which allocates millions of dollars in state funds to finance tuition-free college for state residents. In addition, the Biden administration has been sending signals that a student loan forbearance extension may be on the table. 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 March 14, 2022
1. New Mexico governor signs tuition-free college legislation for state residents
Qualifying residents of New Mexico will now officially receive a tuition-free college education if they attend an in-state public university, community college or tribal college.
The scholarship applies to part- and full-time students, those who recently graduated high school, older adults earning a degree and students pursuing career training certificates, marking it as the most comprehensive free college program in the nation.
Students must attend a public in-state school to qualify for the benefit, and they must meet specific criteria:
- Be a resident of the state for a minimum of 12 consecutive months.
- Be enrolled at an approved college or university for at least six credit hours per semester.
- Have a minimum GPA of 2.5.
- Be pursuing their first bachelor’s or associate degree, or an approved career certification.
- Remain enrolled for each consecutive semester of the program.
There’s currently no application process set by the state government for students; rather, representatives from eligible in-state institutions will assist students individually. However, the state highly encourages students to also fill out Free Application for Federal Student Aid (FAFSA) to cover expenses beyond tuition, such as room and board, supplies and technology.
How this affects student loans
The Opportunity Scholarship is a statewide first-dollar program, which covers tuition and fees before other financial aid is disbursed. As of now, there are 33 state free-college programs in the U.S., but most are last-dollar programs — which provide funding only after a student has exhausted other financial aid. Most of these programs are also limited to community college.
2. Biden administration hints at forbearance extension past May
Though the current pause on federal student loan payments is scheduled to end on May 1, there have been several recent indications that the period of forbearance could be extended once more.
Early last week, Politico reported that the Education Department has directed federal student loan servicers to hold off on sending out notices concerning the upcoming forbearance period expiration date. Servicers are required to send out several reminders before payments resume; with a little over a month before forbearance expires, the timing of this direction may indicate that the department is considering an extension.
What’s more, White House Chief of Staff Ron Klain said in an interview with “Pod Save America” that President Biden would be announcing the latest news on student loan forgiveness by May 1. “The president is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause,” Klain stated.
How this affects student loans
The student loan relief period, which has given federal borrowers a break from payments and interest charges, has been extended five times since March 2020. Another extension would give borrowers more time to prepare for the overhaul of the federal student loan servicing system that is underway, and it would also put Democrats in a more favorable position in the upcoming midterm elections.
With all that said, an extension of the payment pause is not guaranteed. Borrowers should still be thinking ahead to the resumption of their federal payments and crafting a repayment plan in case payments come due on May 1. In either scenario, you will receive instructions from your student loan servicer in advance.
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.