Biden just shortened the timeline to student loan forgiveness for these borrowers
Recently announced changes mean you may already qualify for student loan forgiveness. (iStock)
President Joe Biden announced last week that he is shortening the timeline to provide forgiveness for some student loan borrowers enrolled in the Saving on Valuable Education (SAVE) plan.
Starting next month, borrowers with as few as 10 years of payments who initially took out $12,000 or less for college will have their remaining debts zeroed. Borrowers must be enrolled in the SAVE Plan to qualify.
The Department of Education has also launched an outreach and email campaign to encourage borrowers not currently enrolled in SAVE to sign up because they may benefit from this shortened repayment period. Borrowers who attended community colleges will be most impacted since these students typically borrow smaller amounts. The Department estimates that the SAVE Plan will make 85% of future community college borrowers debt-free within 10 years. The SAVE Plan will also help borrowers who are more likely to struggle with their loans, as most borrowers in default originally borrowed $12,000 or less.
As many as 6.9 million borrowers have already enrolled in the SAVE Plan as of early January, with more than 3.5 million receiving at least $130 billion in student loan relief.
"Beyond being the most affordable student loan repayment plan ever available, the Biden-Harris Administration designed the SAVE Plan to put community college students and other low-balance borrowers on a faster track to debt forgiveness than ever before," U.S. Secretary of Education Miguel Cardona said. "Our ability to deliver this relief to borrowers months ahead of schedule is a testament to the Biden Administration's commitment to delivering relief to as many borrowers as possible, as quickly as possible."
If you're having trouble making payments on your private student loans, you won't benefit from federal relief. You could consider refinancing your loans for a lower interest rate to lower your monthly payments. Visit Credible to get your personalized rate in minutes.
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SAVE helps families plan for college
Families spent roughly $28,000 on college for the academic year 2022-23 — an 11% increase from $25,313 in 2021-22 — and covered half of expenses with income and savings, according to a recent Sallie Mae and Ipsos survey. Scholarships and grants were used by 76% of families and covered 29% of costs, and 41% of families reported borrowing for college, covering 19% of costs.
Cardona said that the Biden administration's SAVE plan is essential for those with existing student debt and for families mapping out how they will pay for college today.
"Today's announcement gives borrowers an even greater reason to check out the SAVE plan and find out if they may qualify for earlier debt relief," Cardona said. "With lower monthly payments, protection from runaway interest, and faster timelines to debt forgiveness, President Biden's SAVE plan is not only benefitting helping millions of current borrowers but also providing the students of today and tomorrow with a more affordable pathway to college degrees and credentials."
If you are currently in school or starting soon and need more financial aid than you can receive through FAFSA, consider taking out a private student loan while interest rates are low. Visit Credible to find your personalized rate without affecting your credit score.
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New FAFSA may shortchange families
The 2024–25 FAFSA form expands eligibility for federal student aid, including Pell Grants, and provides a streamlined user experience, according to the Department of Education. Some 610,000 new students from low-income backgrounds will be eligible to receive Federal Pell Grants due to updates to student aid calculations. Applicants will also be able to skip as many as 26 questions, depending on their circumstances.
However, the 2024-25 FAFSA will include three-year-old tables for assessing the ability to pay for college and does not accurately reflect the current high inflation environment and will cause millions of families to qualify for thousands of dollars less financial aid than they deserve, according to higher education expert Mark Kantrowitz.
"In a normal year, modest inflation rates would result in small adjustments to these tables," Kantrowitz said in a report. "But inflation rates have been much higher recently, increasing by 18.32% from April 2020 to April 2023. The U.S. Department of Education has said that it doesn't plan on making the inflation adjustments, even though it is required to do so by law, until the 2025-26 FAFSA."
If you are looking to take out a private student loan because federal loans won't cover all of your college expenses, don't navigate your loan options alone. Credible can help compare student loan companies (and hopefully land you some of the lowest rates for what you're looking for).
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