By Senator Lena C. Taylor
For those hoping to see the Biden/Harris administration’s student loan forgiveness initiatives survive legal challenges, you are likely feeling pretty anxious right now. Private for-profit colleges and trade schools, in Texas, are the latest to challenge new administration rules that would forgive the loans of those defrauded by colleges that intentionally misled students or suddenly closed their schools. As they await a November trial date, Biden/Harris continues to work on removing barriers to student loan forgiveness, where appropriate. It is with this in mind, that I want to share other options.
The current pause in student loan payments is set to expire at the end of this month. As of September 1, 2023, interest will begin to accrue on federal student loans. This means payments for most borrowers will resume in October. For those trying to figure out a pathway to deal with their debt, I want to share the below information put together by Austin Reid with the National Conference of State Legislatures.
Borrowers will have access to temporary flexibilities to successfully reenter repayment, a new income-driven repayment plan that promises more affordable payments, and multiple pathways for loan forgiveness. In terms of restarting payments, the Federal Student Aid office has created a landing page to assist borrowers. Borrowers are advised to make sure their contact information is up to date with both the federal office and their loan servicer so they can receive timely communication on the due date for their first student loan payment.
The Department of Education has also announced an “on ramp” program that will provide flexibilities until Sept. 30, 2024, as borrowers transition to repayment. While borrowers are advised to make payments, those who miss a payment or make a partial or late payment will not experience negative consequences, such as being reported to credit bureaus. Additionally, any unpaid interest will not capitalize at the end of the on ramp period. No action is necessary for borrowers to take advantage of these flexibilities.
Borrowers who have defaulted on their loans will also have access to the “Fresh Start” program, which provides a pathway out of default. Borrowers who opt in to the program will no longer experience certain negative consequences of default, such as collections activity, but must take additional steps to claim full benefits.
Borrowers can also apply for a new income-driven repayment plan, known as Saving on a Valuable Education (SAVE). This plan is more generous than existing income-driven repayment plans, which allow borrowers to make monthly loan payments that are tied to their income rather than the amount they borrowed.
The SAVE plan will immediately increase a borrower’s income that is exempted from repayment to $32,805 from $21,870. This means that borrowers who make less than $32,805 will not owe a monthly payment and still receive credit toward loan forgiveness thresholds.
There is also help for borrowers with undergraduate loans and pathways to loan-forgiveness still remain. Since 2021, the Education Department has forgiven $116 billion in student debt. Reforms made under the Biden/Harris administration have made loan forgiveness more accessible. I encourage Wisconsin residents to utilize every opportunity to improve their financial outcomes. Start the process by visiting studentaid.gov.