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What could student loan repayment look like in 2021?

Headlines these past few weeks have indicated that student loans are likely to be one of the next big political battlefields. For university employees managing borrower repayment and reporting cohort default rate, keeping track of the facts will help you communicate a clear message to borrowers who may be experiencing confusion, frustration, and fatigue.

The key distinctions between the current programs and the Biden campaign student loan proposals are in the areas of student loan forgiveness, student loan discharge (including bankruptcy discharge), public service loan forgiveness, and income-driven repayment plans.

Student Loan Forgiveness

A $25 billion student loan forgiveness proposal was included in the most recent stimulus package last fall, which would forgive 1.7% of the $1.54 trillion in federal student loan debt outstanding. This may or may not be passed when Congress resumes.

The Biden Administration has proposed to forgive tuition-related undergraduate student loan debt. To qualify, borrowers must have attended public colleges or historically black colleges or universities (HBCU) and earn less than $125,000 annually. Biden supported the $10,000 in federal student loan forgiveness proposal introduced by House Democrats last fall.

Student Loan Discharge

The Biden administration would restore the 2016 version of the Borrowers Defense to Repayment Act and supports relaxing current student loan bankruptcy requirements.

Public Service Loan Forgiveness

The Biden Administration has proposed revising the PSLF plan to set a maximum of $50,000 in qualifying student loan debt that may be forgiven. A borrower must work in qualifying public service and can have $10,000 forgiven each year for up to five years. The existing PSLF program would remain in effect for government workers, teachers, and other nonprofit employees and would continue to require borrowers to make 120 payments.

Income Driven Repayment

Under the Biden Administration, only undergraduate student loans would qualify for IDR plans, but borrowers’ monthly payments would only be 5% of their discretionary income. Borrowers earning less than $25,000 annually could qualify for monthly payments of $0, and any remaining balance after 20 years would be forgiven tax-free. All borrowers would be automatically enrolled in IDR but would have the option to opt out.

The CARES Act - Expiration or Extension?

On July 30 , the Department of Education extended the interest-free pause on student loan payments through January 31, 2022. At this writing, much remains up in the air regarding what will happen at that point. Regardless of when payments restart, millions of Americans may struggle to find the resources they need.

What does this mean for you?

Whether or not Congress or the Executive Office enact the new plans, it’s important to understand what may be in play over the next several months.

When you are aware of the student loan landscape, you can help borrowers prepare to meet their obligations and ensure that your institution remains eligible to offer federal loans as a financial aid option. With no clear path to relief on the horizon and the possibility of additional COVID-19 closures that could affect personal finances, borrowers need reliable, clear communication from their schools and loan servicers.

If you have not already begun borrower outreach, or if your outreach program is difficult to track or measure, reach out to PTI today to discuss affordable options for repayment management tools. Call (657) 232-4353 or email for a free consultation.

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