What do I Need to Know About the Recent Student Loan Changes?

Q: What is going on with student loans? The headlines have me so confused! As a federal student loan holder, what do I need to know?

A: Student loans have undergone many changes over the last few years. Let us help you make some sense of it all! We’ve outlined important changes you’ve got to know about and the steps to take to benefit from these adjustments. 

A brief overview of recent student loan changes 

First, let’s look at the timeline of these student loan changes: 

• Mar. 2020-Forbearance (a temporary pause) on student loans is enacted by the federal government in response to financial hardships caused by the coronavirus pandemic.
• Apr. 2022-The Education Department announces an Income-Driven Repayment (IDR) plan and Public Service Loan Forgiveness (PSLF).
• Oct. 2022-Congress passes the Joint Consolidation Loan Separation Act.
• July 2023-The Education Department announces the first major wave of loan forgiveness is coming for over 804,000 borrowers.
• July 2023-Parts of the IDR plan go into effect.
• Sept. 2023-Interest on student loans starts accruing again.
• Oct. 2023-Student loan payments resume.
• July 2024-The rest of the IDR plan goes into effect. 

Forbearance ending on Oct. 1, 2023

After more than three years of student loan pauses, payments will resume this October, while the interest will begin accruing again on Sept. 1. 

Steps to take: If you have an open student loan, prepare for the change in your budget instead of letting it hit you by surprise. 

PSLF account adjustment, or waiver

This summer, the Education Department announced that loan forgiveness is coming for over 804,000 borrowers who’ve been paying off their student loans for at least 20 years. 

If you’ve been steadily paying off a student loan for at least 20 or 25 years (including forbearance) you’ll be student debt-free after the adjustment. If you borrowed less than $12,000, you’ll be free of that debt burden, even if you’ve only been paying off your student loan for 10 years. 

Steps to take: The adjustment is mostly automatic. However, if you have a commercially held loan, you must apply to consolidate them at StudentAid.gov by the end of 2023 to enjoy the full benefits of this adjustment. 

A new IDR plan

The existing income-driven REPAYE plan is being replaced by a new, broader plan called Saving on A Valuable Education, or SAVE. SAVE is expected to halve the monthly payments for many. 

Steps to take: Borrowers can sign up for this new plan before forbearance ends this fall. However, the full plan will not take effect until July 2024. If you are already enrolled in the REPAYE plan, your loan will automatically be moved into the SAVE plan in October.

Also, if you qualify for the PSLF waiver, but you’ll have a balance remaining after the adjustment, you’ll need to sign up for an IDR plan when payments resume to keep building credit toward loan forgiveness. 

Student loan servicer switches

In April 2023, the Education Department signed contracts with five federal student loan servicers, which are expected to go live in 2024. If the Department transfers your loans to another servicer, your current and new servicers will notify you about the change.  

Steps to take: Make sure your contact information is current with your servicer. 

Use this guide to stay informed on recent student loan changes.