Expert Discloses Potential Changes To Student Loan Repayments

President Biden’s student loan debt forgiveness program—which would offer up to $20,000 of debt relief to millions of qualified borrowers—is currently blocked after a Federal District Court in Texas called the plan “unconstitutional.”

The Biden administration has announced that it will continue fighting to pass the debt forgiveness program, but any debt cancellation probably won’t occur until at least next year. Bob Haegele, a personal finance writer for GOBankingRates, recently offered insight into some of the potential shakeups that could go into effect in 2023.

REPAYMENTS PAUSED, FOR NOW

The biggest change, Haegele says, is the fact that federal student loan repayments have officially been paused again until June 2023. Previously, repayment plans were set to resume in January 2023.

According to a statement by The White House, “the Administration is extending the pause on federal student loan repayments to allow for the Supreme Court to rule in the case on the student debt relief program. The pause will end no later than June 30, 2023. Payments will resume 60 days after the pause ends.”

Experts say resuming payments could undermine the administration’s reasoning for forgiveness.

“The whole premise of this debt relief, as they laid out in their briefing, was that this debt relief program is designed to alleviate the burdens of restarting a repayment plan,” Persis Yu, deputy executive director of nonprofit advocacy organization Student Borrower Protection Center, tells CNBC. “It seems like you would have to extend the payment pause so that the administration can figure out the pathway to get this relief to borrowers.”

PUBLIC STUDENT LOAN FORGIVENESS COULD BE PERMANENT

Another change that could be coming down the pipeline is the making Public Student Loan Forgiveness (PSLF) permanent. PSLF is a debt relief program that forgives the remaining balance on Direct Loans after borrowers make 120 qualifying monthly payments.

“The proposed change would forgive all outstanding debt for eligible borrowers who have served at a non-profit, in the military, or in federal, state, Tribal, or local government for at least 10 years, including non-consecutively,” Haegele explains. “This change is in line with the Limited PSLF Waiver, which ended on October 31, 2022. The potential change would make this permanent and would go into effect in July 2023.”

AN INCREASE IN PELL GRANT MAXIMUMS

Pell Grants are needs-based federal grants that generally go to low-income families. Currently, however, Pell Grants are maxed at just $6,495—which for many students isn’t enough to pay for a college education.

“To help cope with the rising cost of college, the Biden administration hopes to increase the federal Pell Grant maximum for the 2022-23 academic year,” Haegele says. “While the administration originally aimed to double the maximum, it compromised on that amount, saying it would increase the maximum to $8,670.”

Sources: GOBankingRates, CNBC