Student rates

If you’re confused about student loan forgiveness and student loan payment suspension, here’s what you need to know

If you are confused about student loan forgiveness and student loan payment suspension, you are not alone.

Here’s what you need to know — and what it means for your student loans.

Student loans

If you have student loans, you may be wondering what will happen with student loan repayment, student loan forgiveness, student loan forgiveness, and student loan payment suspension. It seems like every day there is a new proposal, tweet or speech regarding your student loans. The result is confusion.

Let’s make it very simple for you. Here’s the latest on your student loans and what could realistically happen.

What happens with the student loan payment pause?

Let’s set the record straight: Federal student loan repayments are expected to resume after May 1, 2022. That said, there have been speculation that Biden could extend the student loan payment pause for an unprecedented fourth time (and sixth extension overall, including President Donald Trump’s two extensions). There are two indications that this could happen. First, White House Chief of Staff Ron Klain said in a recent podcast that the president may extend the student loan payment break. Second, the US Department of Education has apparently asked student loan servicers to stop notifying student borrowers about the restart of student loan repayments in May. However, the president has not released any public statement on extending the student loan payment break. It is important to note that the student loan payment suspension only applies to federal student loans.

(Biden could extend student loan payment break indefinitely)

What do all these student loan forgiveness offers mean for your student loans?

There is no shortage of student loan cancellation proposals. For example, Senator Bernie Sanders (I-VT) wants all $1.7 trillion in student loans forgiven. Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) want up to $50,000 in student loans forgiven. This proposal would reduce student loan forgiveness to $25,000 for student borrowers. This senator wants the cancellation of student loans for health care workers and teachers. Finally, this new proposal would extend the student loan payment pause and cancel student loans. What does this mean for your student loans? For now, these are just suggestions. To become law, Congress must first pass a law and the President must sign the bill into law. Given the current balance of power in Congress, it is unlikely that any of these legislative proposals for student loan forgiveness will become law any time soon. (Here’s who won’t qualify for $6.2 billion in student loan forgiveness)

Will your student loans be forgiven?

Your student loans are unlikely to be canceled before May 1, 2022. (Student loan cancellation does not mean what you think it means). Why? There is no congressional support for large-scale student loan cancellation. That said, Biden has said he wants Congress to pass legislation for $10,000 in student loan forgiveness. However, he has expressed doubts that he has the legal authority to enact large-scale student loan forgiveness through executive action without further authorization from Congress. (What if you don’t qualify for student loan forgiveness). Progressive Democrats in Congress are pressing Biden to enact large-scale student loan forgiveness, but it’s doubtful the president has such legal authority. Could Biden try to enact large-scale student loan cancellation? It’s possible. If this happens, it does not mean that the cancellation of the student loan will be implemented. Expect potential legal challenges, which could delay any student loan forgiveness for months or more.

(Biden could cancel student loan and suspend student loan payment this year)

Will interest rates on student loans be eliminated?

Many student borrowers wonder if interest on student loans will be eliminated. This includes whether interest rates on student loans will be permanently reduced to 0%. Due to the suspension of student loan payments, interest rates on federal student loans have been temporarily set at 0%. This did not result in any new interest accrual for student borrowers. Senator Marco Rubio (R-FL) has proposed that interest rates on federal student loans be 0%. That said, Congress has no plans to eliminate student loan interest or fix interest rates at 0% permanently. Therefore, when student loan repayments restart, you should expect your student loans to have your regular pre-Covid-19 pandemic interest rate. If you have variable interest rate private loans, your interest rate will be higher compared to your interest rate before the Covid-19 pandemic. (Student loans could become more expensive with higher interest rates). Why? The Federal Reserve raised interest rates this month, which means you should expect the interest rate on variable interest student loans to be higher.

(If Biden extends student loan payment pause, these 3 things would happen)

Will income-based repayment plans get simpler?

You may be wondering if income-based repayment plans like IBR, PAYE, REPAYE, and ICR will get any easier. Income-driven repayment plans are available for federal student loans, especially for student borrowers who are struggling to make monthly student loan payments. With income-based repayment, your monthly student loan payment is 10% to 20% of your discretionary income. Biden has proposed simplifying the income-based repayment into a single payment plan that would reduce your monthly student loan payment to 5% of your discretionary income. Democrats and Republicans have expressed interest in simplifying income-contingent reimbursement. (These Republicans want to end student loan relief now). The US Department of Education is gathering feedback and evaluating potential options for modifying student loan repayment. This includes the ability to make enrollment automatic, reduce the number of payment plans, and change the discretionary income percentage. However, significant changes are unlikely to be made before May 1, 2022, when student loan repayments restart. Likewise, Congress is unlikely to pass legislation in the short term that would significantly alter the income-contingent reimbursement. It’s possible that the US Department of Education could simplify income-based reimbursement through its rulemaking review process, though no major changes are expected in the near term.

(Explosive Report Claims This Student Loan Service Deceived Student Loan Borrowers)

How do I get student loan forgiveness?

There are many ways to get student loan forgiveness. This includes canceling public service loans, defending the borrower against repayment, and canceling teacher loans. Even if there is no large-scale student loan forgiveness, Biden has committed to more student loan forgiveness for student borrowers. Biden has forgiven $15 billion in student loans since becoming president. Last week, Biden announced he would forgive $6.2 billion in student loans. Its approach focuses on targeted student loan cancellation for specific groups of student borrowers (rather than student loan cancellation for each student borrower). For example, Biden created a limited waiver for the civil service loan forgiveness program. This limited waiver allows student borrowers to count previously ineligible student loan payments toward student loan forgiveness requirements. This is a game-changer for borrowers who can now get retroactive credit for late student loan payments, partial student loan payments, and student loan payments made under the wrong income-based repayment plan.

Student loans: next steps

This may not answer all of your questions, but hopefully it will set the record straight on some major issues regarding student loans, student loan relief, student loan repayment, forgiveness student loans and the cancellation of student loans. For now, federal student loan repayments will resume after May 1, 2022. Make sure you have a plan and know your options.

Here are some popular ways to pay off student loans and save money:

Student Loans: Related Reading

Here’s who won’t qualify for $6.2 billion in student loan forgiveness

Biden to Forgive $6.2 Billion in Student Loans

New proposal would extend student loan payment break and cancel student loans

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