The student loan crisis has been an ongoing issue in the United States for several years. With the rising cost of college tuition and limited financial aid opportunities, many students have turned to loans to pay for their education. If you find yourself in this category, here are some of the latest developments regarding student loans:
- Student Loan Forgiveness Programs
President Joe Biden has been exploring the possibility of forgiving a portion of student loan debt. While there have been no definitive decisions made yet, the president has shown support for the idea of forgiving up to $20,000 in student loan debt for each borrower. Additionally, some members of Congress have been pushing for even more significant student loan forgiveness, with some proposing a plan to forgive up to $50,000 per borrower.
However, the Student Loan Debt Relief is currently blocked due to an ongoing Federal appeals court.
- Student Loan Interest Rates
Interest rates on federal student loans have been historically low in recent years, but there is speculation that they may increase soon (Bankrate, 2022). This is because the Federal Reserve has signalled its intention to raise interest rates in the coming months as the economy recovers from the pandemic.
- Student Loan Repayment Plans
There are several student loan repayment plans available to borrowers, including Income-Driven Repayment (IDR) plans. These plans base your monthly loan payment on your income and can make it easier for borrowers to manage their debt. In January 2022, the Department of Education announced that it would be making changes to IDR plans, making them more accessible to borrowers and easier to understand.
There are also other repayment plans that students can consider such as Revised Pay As You Earn Repayment Plan (REPAYE) or Income-Contigent Repayment Plan.
- Private Student Loans
While most student loans are issued by the federal government, there are also private lenders that offer student loans. These loans typically have higher interest rates and fewer borrower protections than federal loans. However, there is some good news for private student loan borrowers: in January 2022, the Department of Education announced that it would be offering new loan forgiveness opportunities for certain borrowers with private student loans. However, nothing has been set in stone.
Although private student loan borrowers cannot expect on broad student loan forgiveness to eliminate their debt, there are options available to make repaying these debts more affordable. While refinancing at a reduced interest rate isn’t quite as ideal as having your debts fully eliminated, doing it sooner rather than later may have a significant positive impact on your finances.
See Forbes’ list of Best Private Student Loans of March 2023.
- Student Loan Default
Unfortunately, many borrowers struggle to make their student loan payments and end up defaulting (failing to repay the loan on time). Defaulting on a student loan can have serious consequences, including damage to your credit score and wage garnishment.
Have questions? Reach out to Johns Hopkins Federal Credit Union for further assistance.
