Federal Government Announces New Student Loan Relief Measures

Federal student loan borrowers who have been struggling under high interest rates since July 2011 or earlier may qualify for relief under three different programs.

Borrowers who attended school at least half time (i.e., 30 credits or more) between 12/31/2009-12/31/2011 may qualify for loan forgiveness if they enrolled in or started repayment after 6/30/2012. If a borrower applies for loan forgiveness before 12/31/2013, they may only receive partial loan forgiveness. To qualify for full loan forgiveness, borrowers need to enroll in or begin repaying their loans no later than 4/1/2014.

Any borrower whose loans were resold by private lenders may qualify for loan forgiveness. In order to qualify, borrowers must apply for forbearance with their lender prior to 4/1/2014 and they should contact the lender directly about their eligibility.

Borrowers who attend schools with low graduation rates as measured by the U.S. Department of Education’s Integrated Postsecondary Education Data System may qualify for loan forgiveness under the Public Service Loan Forgiveness program.

A new bill introduced last month would provide loan forgiveness to people who work in the public sector, including teachers, doctors, nurses, social workers, law enforcement officers, firefighters, and emergency medical service personnel.

Loans for graduate students at public institutions could be forgiven under a separate bill passed in April. Under the program, borrowers will not have to pay back any portion of their undergraduate loans while pursuing graduate degrees.

Congress will also vote this week whether to extend temporary federal unemployment insurance benefits that expired at the end of December.

Federal Government Announces New Student Loan Relief Measures

Federal student loan forgiveness program

The federal government announced the expansion of its student loan relief program Monday, April 29th 2016. The program launched last fall offered borrowers $20 billion to cancel their outstanding loans. Over the past year the number of people who have benefited from the program has tripled to nearly 500,000 households. To qualify for a loan forgiveness you must have obtained an education under certain conditions. You must have been enrolled at least half time in academic full-time degree seeking undergraduate studies or vocational programs. This excludes teachers, administrators, coaches, and students currently enrolled in graduate level study. You must have graduated from school no later than December 31st 2015, and complete the forgiveness application by October 1st. If you do not meet these requirements, you may still be eligible for some sort of student loan relief if you have exhausted all repayment options. In addition to making monthly payments until the debt is forgiven, borrowers may also request additional payment arrangements like forbearance or deferment before they start to make regular payments. Both of these alternatives allow borrowers to temporarily suspend payments without losing any accrued interest. If you have questions about whether you qualify for student loan forgiveness please visit www.studentaid.gov/loanhelp.

Paying off student loan debt while saving for retirement

If you have student loan debt, you should consider using your payments to pay down your credit card balance instead of putting them towards a fixed interest rate mortgage. By doing so, you’ll be able to save money and pay off your debt faster than if you were only paying it back each month. If you’re worried about spending less than you earn, you can always use a savings plan like a 401k rollover to divert your income to retirement.

Federal Government Announces New Student Loan Relief Measures

Changes to federal loan repayment programs

The Department of Education (ED) announced several changes to the student loan program on October 5th, 2018. These changes included lowering monthly payments for eligible borrowers. The Federal government says these changes will benefit approximately 8 million people who have loans totaling $1 trillion dollars. Borrowers whose loans exceed their income will now pay no interest while they are working or enrolled in school full-time. Those who do not qualify for this payment plan will only have to make the minimum payment and will then begin making lower and lower payments each month until their debt is paid off.

Higher education institution enrollment caps

Higher education institutions will be able to cap the number of students at federally subsidized schools to 150 percent of the current capacity. This change was enacted to prevent over crowding and help provide access to education.

No more automatic annual increases

Undergraduate loan eligibility will remain unchanged for three years following graduation. After that time, undergraduate students will automatically increase their rates by 2.05%. Graduate student loan eligibility will remain the same.

Federal Government Announces New Student Loan Relief Measures

Federal student loan borrowers who have had their loans forgiven would no longer be charged interest while they work without pay at a job that doesn’t require them to be paid at least $75,000 per year. In addition, those loans could not be discharged if the borrower filed for bankruptcy protection. That means that the government wouldn’t get any money back. Loans that were deferred under the Bush administration’s loan-forgiveness program would be treated identically to loans that were taken out before July 1, 2007.

Students who completed 12 years of school and had remaining debt of less than $15,000 wouldn’t have to start repaying their loans until after 10 years of payments or 8 years of payments depending on income. Borrowers currently in deferment would have to repay the same amount and would still qualify for relief. Under current law, students who owe more than $65,000 in student loans won’t be eligible for repayment forgiveness.

As of 2014, federal student loans cannot be discharged if a borrower becomes permanently disabled. Previously, those loans couldn’t be discharged if a person became unemployed due to circumstances outside of his or her control.

Under the new rules, loans that are subsidized or need based will continue to be considered except for loans that are currently being repaid. Loans that are currently being repaid will be considered only if they were taken out between September 26, 2010 and August 31, 2012. These loans will be reclassified as unsubsidized loans. Those classified as unsubsidized may be able to receive some relief. Currently, loans classified as unsubsidised have higher interest rates and are ineligible for forgiveness.

If borrowers don’t make at least 120 qualified monthly payments over 180 months, then the remaining balance would become fully dischargeable. Qualifying payment includes making at least 20 percent of discretionary income toward repaying the loan. A borrower would have to spend at least 6 months working without pay to satisfy the requirement.

The maximum interest rate on student loans would increase from 5.31 percent to 6.21 percent, starting in October 2017. The standard variable rate would go from 4.66 percent to 4.74 percent.

All of these changes would take effect beginning Oct. 1, unless Congress passes legislation overriding it.

Federal Government Announces New Student Loan Relief Measures

Federal student loan interest rate cuts

The federal government announced on August 1st 2018 that they would cut student loan interest rates by 0.8% to 4.66%. This move was designed to encourage students to continue their education by lowering the cost of borrowing money while they pursue their degrees. The U.S. Department of Education estimates that approximately seven million people have benefited from these lower rates since they were implemented in July 2017.

Federal student loan forgiveness program

The government is offering a $20 billion loan forgiveness plan called the Public Service Loan Forgiveness Program (PSLF). This plan is targeted at those who work full time in public service jobs, including teachers, firefighters, police officers, and social workers. Students need to complete 120 credit hours per year over four years in order to qualify for this loan forgiveness.

State student loan forgiveness programs

There are currently 19 states that offer some sort of state-based loans forgiveness plan. These plans vary by location, however, California offers the most generous loan forgiveness program. California forgives loans after 10 years of payments. Other states include Florida, Illinois, Iowa, Maryland, Michigan, Mississippi, Missouri, Nevada, North Carolina, Ohio, Oregon, Tennessee, Texas, Utah, Washington, Wisconsin, and West Virginia.

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