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 March 22, 2021
1. Biden administration revises borrower defense to repayment, providing billions of dollars in forgiveness for federal borrowers
Last week, the Biden administration took a major stride toward student loan forgiveness by announcing revisions to the borrower defense to repayment law. This move will impact roughly 72,000 federal student loan borrowers that only received partial forgiveness while enrolled in the program.
Borrower defense to repayment is a federal law that allows students forgiveness of their student loans if the school abruptly closes, engages in illegal activity regarding student loans or misadvertises the education services provided. Betsy DeVos, the former Trump Secretary of Education, did not favor the full loan forgiveness and tightened restrictions, calling the cancellations “free money.”
Due to this, forgiveness was harder to receive, and borrowers had only three years to prove their eligibility. As a result, many students only received partial forgiveness or no forgiveness at all.
Miguel Cardona, the current U.S. Secretary of Education, says that he will create a streamlined path to full forgiveness of federal student loan debt for students who qualify for borrower defense to repayment.
How this affects student loans
Borrowers who qualify for borrower defense to repayment will have the opportunity to have their student loans completely forgiven if they have only received partial forgiveness. And while this reversal is a big step, it’s possible that the Department of Education could make bigger reforms to borrower defense to repayment policies in the future.
2. Only 32 borrowers have qualified for full forgiveness with income-driven repayment, new study reports
According to a new National Consumer Law Center report, only 32 federal student loan borrowers have qualified for full forgiveness from their student loans while enrolled in an income-driven repayment (IDR) plan.
Over 8 million borrowers are currently enrolled in an income-driven repayment plan, a program created to alleviate monthly student loan payments. Borrowers enrolled are responsible for making monthly payments based on income and family size. After 20 to 25 years of making these payments, borrowers should have the remaining amount forgiven, but so far, only 32 have.
It isn’t the program that’s the primary problem, but the accessibility, the report states. There are 2 million undergraduates with student loan debt who have been making payments for 20 years who could have been on their way to receiving full forgiveness if IDR were more accessible. “If they were able to properly access and persist in IDR plans, millions of borrowers would now have their debt cancelled by the U.S. Department of Education (ED).”
How this affects student loans
While the IDR program is still available for federal student loan borrowers, this report could push the Department of Education toward reforming the program to make it more accessible to borrowers. The report alleges that better management, promotion and design are the keys to making more borrowers eligible for and aware of this federal student loan benefit.
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 this page for the latest news.