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Five Important Updates on Federal Student Loans
To say there’s been a lot going on in the world of federal student loans is an understatement! Over the last couple of years, the U.S. Department of Education (ED) has rolled out several initiatives designed to help borrowers. Below you’ll find an overview of current initiatives, but first we’ll outline which loans are eligible and explain why some federal student loans aren’t eligible.
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1. Which student loans are eligible?
To be eligible for the initiatives below, the loan must be federally held, including:
- Federal Direct Loans
- Federal Family Education Loan (FFEL) Program loans held by ED
- Federal Perkins Loans held by ED
- Defaulted FFEL Program loans not held by ED
ED can only apply these initiatives to loans that are federally held (as well as defaulted loans that were guaranteed by the federal government). Under the old FFEL Program, which ended in 2010, loans were guaranteed by the federal government, but funds were provided by and loans were held by commercial lenders. Loans that continue to be held by those lenders are not eligible unless they are defaulted. Similarly, many Perkins Loans continue to be held by the school the borrower attended and are not eligible. In some cases (but not all), borrowers can consolidate their non-federally held loans into a Direct Consolidation Loan to become eligible. To learn more, click the link in the individual sections below.
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2. Biden/Harris Debt Relief
On August 24, 2022, the Biden/Harris Administration announced that ED would provide one-time debt relief of up to $20,000 on federally held student loans to Pell Grant recipients and up to $10,000 in relief to non-Pell Grant recipients. To be eligible, borrowers must have an income below $125,000 (for individuals) or $250,000 (for married couples or heads of households). For more details on the program, click here.
In mid-October, the application for debt relief became available. On October 21, the debt relief plan was temporarily blocked by the courts, though applications continued to be accepted. As of November 11, applications were no longer being accepted. The Biden Administration is seeking to overturn the court orders, and the Supreme Court will hear arguments in February. It is anticipated that the Court will release its decision in June. To subscribe for updates from ED on this and other topics, click here.
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3. Student Loan Payment Pause
As of March 13, 2020, federally held student loans are eligible for a payment pause. During this payment pause, no payments are due and the interest on these loans is set at 0%. The payment pause was scheduled to end numerous times, most recently on December 31, 2022.
However, the student loan payment pause is now extended until 60 days after ED is permitted to implement the debt relief program or the litigation is resolved. If the debt relief program is not implemented and the litigation is not resolved by June 30, 2023, payments will resume 60 days after that. ED will notify borrowers before payments restart. For the most up-to-date information regarding the payment pause, visit studentaid.gov/announcements.
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4. Income-Driven Repayment (IDR) Waiver
The IDR Waiver is a one-time account adjustment conducted by ED. This adjustment provides credit toward IDR forgiveness and Public Service Loan Forgiveness (PSLF) for payments already made. This adjustment will be conducted on all federally held loans and will credit the following toward IDR forgiveness:
- any months in which you had time in a repayment status, regardless of the payments made, loan type, or repayment plan;
- 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance toward IDR and PSLF forgiveness;
- months spent in deferment (except for in-school deferment) prior to 2013; and
- any time in repayment prior to consolidation on consolidated loans.
Commercially held FFEL and Perkins loans are not eligible but can be made eligible by consolidating into a Direct Consolidation Loan before May 1, 2023. Under the IDR Waiver, consolidation will not reset the payment count. For more information on the IDR Waiver click here.
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5. Fresh Start
The Fresh Start Initiative, announced on April 6, 2022, is designed to help eligible borrowers who are in default. To be eligible, borrowers must have federally held loans that were in default prior to the payment pause (no loans should have defaulted during the payment pause). In the short term, borrowers who are eligible will temporarily regain several student aid benefits. Longer term, eligible borrowers will have the opportunity to get out of default, keep the short-term benefits, and gain access to additional benefits, including access to more flexible payment plans.
Fresh Start will continue through one year after the payment pause ends. Those who wish to take advantage of this initiative must act before the end of the Fresh Start period. Make sure your loan holder has your most up-to-date contact information so you don’t miss important messages about Fresh Start. To learn more about the initiative, click here.
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The best source of information for these initiatives can be found at StudentAid.gov. If you have questions about your specific loans, contact your loan servicer. If you aren’t sure who is servicing your loans, log into StudentAid.gov with your FSA ID for a list of your federal loans and the name and contact information of your loan servicer(s). If you’re looking to talk with someone about these initiatives, please feel free to reach out to us at FAME. We’re here to help in any way we can! | |
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