Federal student loans will change this year.
Here’s what you need to know.
With student loan relief extended for only 90 days, student borrowers should be aware of several changes to federal student loans this year. Here are 3 major changes to your federal student loans:
1. Federal student loans: payment will resume on May 1, 2022
Student borrowers have been enjoying temporary student loan forbearance since March 2020, when Congress passed the Cares Act, which provided record student loan relief to more than 40 million student borrowers. This student loan relief included:
- no mandatory federal student loan payments;
- 0% interest rate on federal student loans; and
- no collection of defaulted student loans
These key student loan benefits are set to end on May 1. (Biden extended student loan relief, but advocates really want student loans forgiven.) That means student borrowers should prepare to start making federal student loan payments again for the first time in more than two years. Interest rates on student loans will return to their normal rate and start accumulating again. Borrowers who are in student loan default may be subject to wage garnishment or Social Security benefits, for example. (Student loan relief is different from student loan forgiveness, but student loan forgiveness could be why the Democrats lose the midterm election.)
2. Student loan rates will get more expensive
Each year, Congress adjusts the interest rates charged on federal student loans. The Federal Reserve is expected to raise interest rates at least three times this year and possibly four times. If the Federal Reserve raises interest rates, it means student loans can become more expensive. (What higher interest rates mean for your student loans). Which student loans will be impacted? If you take out new federal student loans this year, they may be more expensive if the Federal Reserve raises interest rates. If you have private student loans and have a variable interest rate, your student loan interest rate may increase. The good news is that if you currently have a federal student loan, any increase in interest rates will not affect your current federal student loan interest rate. Why? Federal student loans have fixed interest rates, so they will never change for the life of your student loan whether the Federal Reserve raises or lowers interest rates.
3. Student loan forgiveness will become easier
More student loan forgiveness is coming. President Joe Biden makes it easy to get student loan forgiveness. The president has already canceled $12.7 billion in student loans for borrowers. (Student borrowers will get $15 billion in student loan forgiveness). You can expect more targeted student loan forgiveness, especially for student borrowers who work in government, have permanent disabilities, or have been misled by their college or university through the defense of the borrower for repayment. (Here’s Who Won’t Get Student Loan Forgiveness). It is also possible, though less likely, that there will be large-scale cancellation of federal student loans. (Is student debt forgiveness next?) For public service loan forgiveness, student borrowers can complete a limited waiver to count past student loan payments that were previously ineligible. cancellation of the student loan. This is a major benefit for student borrowers who can “count” student loan repayments, including nearly two years of student loan “payments” (even if they haven’t made any) during the Covid-19 pandemic.
The biggest change to student loans this year is the end of temporary student loan relief. Get ready now so you can access your options and choose the best student loan repayment strategy for you. Here are some popular ways to pay off student loans faster: