The U.S. political landscape may have shifted with President Trump on his way out and President-elect Joe Biden on his way into the Oval Office – but the grim student loan debt picture grows worse. And data tells the tale.
One in four Americans have student loan debt and, collectively, they owe an eye-watering $1.53 trillion in outstanding college loans, according to Nitro, a college payment advisory platform.
3 student loan changes to watch in 2021
With no apparent traction on a new stimulus bill coming out of Congress nor a hint of executive action from the outgoing Trump administration on student loan debt, college borrowers are left to ponder what their debt scenario will look like under a Biden-led White House.
To simplify your research, head to an online marketplace like Credible. Credible can show you all of your student loan options and get you prequalified rates from up to seven lenders in two minutes.
What are the expected changes and how do they impact student loan borrowers? Here are three potential changes that lie ahead for college borrowers in a Biden administration.
- Student loan forgiveness
- Increased repayment leniency
- Coronavirus relief for federal student loans
1. Student loan forgiveness
President-elect Biden campaigned on canceling up to $10,000 of federal student loan debt, with calls within his own party to increase that to $50,000.
“Presently, most federal loans are theoretically forgiven tax-free after 10 years of service, but the application process has a 99% failure rate,” said Andrew Bernstein, a financial advisor with All Points Management in Raleigh, N.C. “The Biden administration would try to simplify the process and make it more efficient, but in turn might lower the total amount of forgiveness to $10,000 annually over five years.”
Private student loan borrowers who are not getting any relief during the coronavirus pandemic should consider other options to lower student loan payments. Visiting Credible to explore refinancing options could be a good first step.
2. Increased repayment leniency
Income-based repayment, currently capped at 10% of discretionary income, may be lowered to only 5% of discretionary income, and public-service loan forgiveness will be revamped, Bernstein said.
Refinancing your private loans could lower your interest rate and your monthly payment. Visit Credible to compare variable interest rates and fixed interest rates for refinance loans from multiple lenders without affecting your credit.
3. Coronavirus relief for federal student loans
Timing is an issue, as well, as the COVID-related loan payment suspension deadline approaches.
The current student loan forbearance policy places federal student loan borrowers on an administrative forbearance that pauses payments, waives the accrual of new interest on loan balance, and halts collection activities on defaulted loans.
“The CARES Act allows for student loan borrowers to defer payments on their student loans, as well as a zero-interest period,” said Michael Foguth, founder of Foguth Financial Group in Brighton, Mich. “Both of these are in play until the CARES Act expires."
Student loan forbearance is now going to remain in effect through Jan. 31, 2021. It's currently unclear if the Biden administration will continue extending that deadline — but it's possible. This is good news for those with federal student loans. However, if you have private student loans, you may want to consider alternative options.
If you're looking for student loan payment relief, visit Credible. You can get prequalified student loan refinancing rates from up to 10 lenders to find out if this approach could save you money.
Next steps for student loan borrowers
What can a student loan borrower do right now until repayments start up again on federal loan debt? Basically, get organized. Lee recommends taking these steps right away.
- Contact your student loan provider to review your account.
- Update any outdated contact information.
- Check your minimum payment and your loan due date
“If your income has changed significantly, also consider recertifying your income-driven repayment (IDR) plan before your scheduled recertification date,” Lee advised. “Also, look into refinancing high-interest private student loan debt.”
Biden's student loan policy
Overall, borrowers should expect lower payments, more avenues for forgiveness, and an easier time paying back their student loans.
“Disadvantages may include very high debt borrowers (like physicians) being capped on how much they can have forgiven,” Bernstein said. “The changes also have to be paid for by the federal government.”
Use an online tool like Credible to view a student loan rates table that compares interest rates from multiple lenders simultaneously.
Student loan debt fast facts
Here are a few more student loan debt facts from Nitro:
About 44.7 million Americans have student loan debt
Borrowers owe an average of $37,172 in student loan debt
Borrowers make an average monthly student loan payment of $393
Federal loans have a standard repayment timetable of 10 years, but Nitro cites research putting that number closer to an average of 19.7 years for a typical graduate of a four-year college – and that doesn’t include graduate school debt.