Five Things Borrowers Need to Know Right Now

With student loans dominating headlines once again, getting the most important and most accurate information can be tough for borrowers. Fortunately, we’ve put together a helpful list of five things borrowers should keep top-of-mind right now.

Time is running out to take advantage of the limited PSLF waiver changes to the Public Service Loan Forgiveness (PSLF) Program rules. These temporary rule changes allow borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF.

The PSLF program was created to support people serving their communities through a career in a U.S. federal, state, local or tribal government or nonprofit organization. If you work for an eligible employer within these areas, then your student loans may qualify for forgiveness. With the temporary rule changes set to expire on Oct. 31, 2022, now is the time to apply.

2. Proposed Changes to Income-Driven Repayment

As part of the August 2022 student loan debt relief plan announcement, President Biden introduced changes to Income-Driven Repayment (IDR) plans. While existing IDR plans are already designed to be affordable, consider income and family size when determining monthly payment amounts and are eligible for forgiveness after 20 or 25 years, the plans can be difficult to navigate for those who need it most. Under the proposed reform, more borrowers would be eligible for IDR. Proposed changes include the following.

• Reduce the amount undergraduate borrowers need to pay each month from 10% of their discretionary income to 5%.
• Increase the poverty exclusion from 100% or 150% of the federal poverty limit for a borrower’s family size to 225%.
• Forgive loan balances after 10 years of qualifying payments instead of 20 for borrowers with loan balances of $12,000 or less.
• Cover borrowers’ unpaid monthly interest so loan balances will not grow as long as monthly payments are made, even in the case of $0 monthly payments.
• Ensure IDR plans are easier to enroll in and stay enrolled in without needing to recertify income annually.

It’s important to note that while these proposed changes appear promising for student loan borrowers, they are not in place just yet. Full implementation is not expected to occur until at least the summer of 2023. In the meantime, borrowers should continue to work with their student loan servicers to find the repayment option that best suits their unique situation.

3. Beware of Student Debt Relief Scams

The excitement around student loan debt relief makes conditions just right for scammers looking to take advantage of borrowers. Student loan programs are confusing by nature, and many borrowers don’t know that support and access to programs like forgiveness are always available at no cost. Here are some of the ways borrowers can identify and avoid student loan debt relief scams.

1. They ask for fees upfront. It’s illegal for companies to charge someone before they help them.
2. They promise fast loan forgiveness or a balance reduction. Loan forgiveness is not immediate and is only for borrowers who meet specific qualifications. If a company promises quick loan forgiveness or a drastic balance reduction before understanding a borrower’s unique situation, look out!
3. They use names and seals that seem official. Companies may use names, seals and logos that suggest they are affiliated with the U.S. Department of Education (ED) or other government entities or programs. Companies may say or imply that they have access to certain special repayment plans or forgiveness programs; they don’t. ED has tons of good information about their approved contracted servicers on their website.
4. They rush decision-making. Scammers count on borrowers not having all the information necessary to make an informed decision. They rely on salespeople to close deals, which means not giving borrowers a chance to reflect or research. If a company states that certain options are expiring or pressures borrowers into making immediate payments or signing up right away, be wary.
5. They ask for FSA IDs. If a company claims that they need a borrower’s FSA ID to help them, look out. Dishonest people could use that information to take control of the borrower’s account and their personal information.

Help borrowers stay informed and take action!

• Borrowers can find updates on student loan debt relief at https://studentaid.gov/debt-relief-announcement/one-time-cancellation.
• Borrowers can subscribe to receive ED’s email updates.
• Borrowers should report any suspicious activity to the FTC.

4. Operation Fresh Start

When payments resume on federal student loans, borrowers with loans previously in default can receive a fresh start and re-enter repayment in good standing. The Fresh Start initiative will be available for one year only, and borrowers must enroll if they want to take part.

ED released guidance to schools on awarding federal student aid under Title IV of the Higher Education Act to students with defaulted loans. The Dear Colleague Letter (GEN-22-13) was released on Aug. 17, 2022 and shares insight on the Fresh Start initiative.

5. Preparing for Post-Pause Repayment

After several extensions, the federal student loan payment pause is expected to end on Dec. 31, 2022. Here are some things borrowers can do to prepare before repayment begins again.

1. Update their contact information on their servicer’s website and in the StudentAid.gov profile.
2. Review their auto-debit enrollment or sign up for the first time. To do so, they can log into their servicer’s website or contact their servicer directly.
3. Check out Loan Simulator to find a repayment plan that meets their needs and goals or to decide whether to consolidate.
4. Consider applying for an Income-Driven Repayment (IDR) plan. An IDR plan can make payments more affordable, depending on income and family size.

Ready for more?