Top student loans trends for the week of May 3, 2021: Biden unveils proposals for free community college, increased Pell Grant awards and more

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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.

3 current trends within student loans for the week of May 3, 2021

1. New bill would make loan forgiveness easier for military members

Following a recent Government Accountability Office (GAO) report about military members’ participation in Public Service Loan Forgiveness (PSLF), Sens. Maggie Hassan and Marco Rubio have proposed a bipartisan bill making the path to forgiveness easier.

PSLF is a federal program that forgives student loan debt for those working in eligible public service jobs after 120 qualifying monthly payments. However, according to the GAO report, only 124 of the nearly 177,000 eligible military members have had their loans discharged through the program. The report alleges that this is largely due to a lack of qualifying payments. Notably, deferred student loan payments during deployment are not considered qualifying payments.

Hassan and Rubio’s bill, the Recognizing Military Service in PSLF Act, seeks to change that requirement by allowing deferred payments during military service to count toward PSLF requirements.

How this affects student loans

If passed, this bill would provide an easier avenue to student loan discharge through PSLF for active-duty military members. Experts have criticized PSLF for its stringent qualification requirements for years: The number of borrowers who have actually received forgiveness through these programs has been incredibly low compared to the number who have applied. Revisions to the program, like this bill, could pave the way for millions to receive the forgiveness that this program promises.

2. Student loan borrowers could get assistance saving for retirement

A new bill led by Sen. Ron Wyden aims to help student loan borrowers save for retirement through 401(k) matches. The Retirement Parity for Student Loans Act, sponsored by Sens. Maria Cantwell, Sheldon Whitehouse, Sherrod Brown and Ben Cardin, would allow employers to match student loan payments through contributions to a retirement plan. In other words, student loan payments that the borrower makes would be treated as elective deferrals for the purposes of 401(k) matching, letting the retirement account grow even if the student isn’t making contributions directly.

How this affects student loans

A Bankrate survey found that approximately 29 percent of borrowers with student loan debt are putting off saving for retirement due to their outstanding balances. The Retirement Parity for Student Loans Act could help with this, essentially allowing borrowers to make payments and save for retirement at the same time.

3. American Families Plan calls for tuition-free community college, increased Pell Grant awards and more

During Wednesday night’s joint congressional address, President Biden unveiled the American Families Plan: a collection of large-scale social proposals aimed at helping American families financially.

A large portion of the plan focuses on making higher education more accessible for those in low- and middle-income brackets and closing the equity gap that exists in America. Among the proposals are:

  • Two years of tuition-free community college.
  • Tuition subsidies for students in minority-serving institutions (MSIs), historically Black colleges and universities (HBCUs) and tribal colleges and universities (TCUs).
  • Increased Pell Grants values.

How this affects student loans

While the American Families Plan doesn’t address student loan debt directly — student loan forgiveness is one of the few Biden higher education proposals that didn’t make it into the plan — it may help students avoid the bulk of that debt in the future. Cheaper college, plus the promise of more federal grant funding, could drastically reduce college costs for students moving forward.

Next steps

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.

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Written by
Hanneh Bareham
Student loans reporter
Hanneh Bareham specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand.
Edited by
Student loans editor