Current student loan news for the week of July 18, 2022
Last week, the US Department of Education distributed the final tranche of HEERF funding to eligible US schools and universities. Additionally, a group of House Democrats have proposed a bill that would expedite forgiveness under the Public Service Loan Forgiveness Program (PSLF). Here’s what you need to know about this week’s student loan trends and how they could impact your balance.
2 Current Student Loan Trends for the Week of July 18, 2022
1. Final HEERF funds distributed to select colleges
Last week, the Ministry of Education distributed the final version $198 million in grants through the Higher Education Emergency Relief Fund (HEERF), which was established in 2020 to help students and universities during the pandemic. This final distribution will go to the 244 U.S. colleges and universities with the greatest unmet need as a result of the financial impact of COVID-19.
Most of the 244 aid-eligible schools must distribute about half of the aid directly to students. These funds can be used by students to help pay for basic needs, such as housing, food, and tuition.
How it affects student loans
HEERF financial aid is distributed to students with the greatest financial need, so low-income students can qualify for emergency funding. Students struggling to meet their basic needs should contact their financial aid office. Each school distributes HEERF grants differently; some may automatically apply for grants, while others require a separate application. Financial aid offices may use information from your Free Application for Federal Student Aid (FAFSA) to determine your financial need and eligibility for HEERF aid.
Take away key
Colleges have received the latest round of emergency grants through the Higher Education Emergency Relief Fund, which makes funds available to low-income students.
2. Democrats demand more changes to the PSLF program
Last week, several House Democrats proposed the PSLF Simplification and Strengthening Law of 2022which would reduce the number of payments required for Public Service Loan Cancellation (PSLF) and permanently relax some of the eligibility requirements.
Currently, PSLF wipes out student loan balances for public servants who have made 120 qualifying payments while working for an eligible employer, but borrowers must also meet strict requirements for qualifying loans and repayment plans. Last October, the Biden administration introduced a temporary waiver that expands the definition of an eligible payment, allowing thousands of borrowers to progress to the PSLF. However, this waiver will end on October 31 of this year.
The PSLF Simplification and Strengthening Act of 2022 proposes making certain elements of the temporary waiver permanent, as well as making the rebate available after five years of qualifying payments instead of 10.
How it affects student loans
The biggest benefit of the bill is that it would cut the repayment period in half, making the discount more accessible to eligible borrowers – and it also means that borrowers who have already made at least five years of payments on the plan would see probably an immediate discount. It would also make the following reforms permanent:
- Make any repayment period eligible for PSLF, regardless of federal loan type, repayment plan, and payment.
- Clarify the eligibility of active duty military personnel and Peace Corps volunteers whose loans were in default while in service.
- Allow parent PLUS loan holders and couples who have previously jointly consolidated Federal FFEL loans to reconsolidate their loans into a direct loan.
That said, the bill will have to go through both the House and the Senate, so the likelihood of permanent reform is still up in the air. Borrowers wishing to take advantage of the PSLF’s temporary waiver should register shortly before the program ends on October 31.
Take away key
House Democrats have proposed a new bill that would cancel student debt as part of the civil service loan forgiveness after just five years.
Here’s how you can prepare
Whether you’re new to student loans or in the process of repaying, it’s wise to stay informed about how your student loan rates might change. In 2022, more opportunities for cheaper loans or loan forgiveness may open up; keep an eye on the Bankrate student loan news hub for the latest trends.