President Joe Biden won’t extend student loan relief, but student loan repayments will be easier in 2022.
Here’s what you need to know – and what it means for your student loans.
In a major announcement this week, the Biden administration confirmed what many student loan borrowers feared: that student loan relief will end on January 31, 2022, and student loan repayments will resume on February 1, 2022. C This is devastating news for at least some student loan borrowers who were hoping Biden would extend the temporary hold on student loans in response to the Covid-19 pandemic. (No, Biden will no longer extend the student loan relief). However, the White House press secretary confirmed the news during a press briefing, which now means more than 40 million student loan borrowers will make a required federal student loan payment for the first time in 22 months. (Here’s a list of everyone who wants Biden to extend student loan relief.) Despite this major news, there is a silver lining for student loan borrowers. Here’s how you can earn with your student loans.
Student loan repayments will be easier
The Biden administration will be making several major changes to student loan repayment starting February 1, 2022, including:
- Register more easily for the repayment of the student loan: It will be easier to sign up for an income based repayment plan such as IBR, PAYE, REPAYE and ICR. (That said, Biden won’t cancel student loans until student loan relief ends, meaning student loan borrowers will have to consider other options for paying off student loans.)
- More time to recertify income: If you were enrolled in an income-based repayment plan before the student loan was temporarily forbidden due to the Covid-19 pandemic, you will not have to recertify your discretionary income until August 2022. (This is a good news, but it’s also helpful to understand why Biden ended student loan relief).
- Self-report income for direct loan: If you have direct loans, you can declare your discretionary income yourself, by July 31, 2022, or to request recertification for an income-based repayment plan.
With an income-based repayment plan, your federal student loan payment is based on your discretionary income, family size, and state of residence. Student loan borrowers who are in financial difficulty or have no income can pay as little as $ 0 per month. After 20 years (undergraduate student loans) or 25 years (graduate student loans), you may qualify for full student loan exemption for your federal student loans. (Here’s how to get a student loan discount during the Biden administration). However, after December 31, 2025, you may owe tax on the amount of student loan forgiveness you receive.
Biden came up with a better student loan repayment plan
These major changes should make it easier for borrowers to obtain student loan relief and simplify income-based repayment. (How to qualify for the automatic student loan exemption). As a presidential candidate, Biden proposed a new plan that could help student loan borrowers. This plan would reduce the percentage of discretionary income that student loan borrowers would have to pay through an income-based repayment plan. For example, most income-based repayment plans set your monthly student loan payment at 10% to 20% of your discretionary income. By comparison, Biden proposed to reduce this amount to just 5% of your discretionary income. That said, Biden’s plan is not is among the major changes already announced to help borrowers when they start paying off their student loans again on February 1. (The Department of Education will cancel $ 2 billion in student loans in a matter of weeks).
Student loans: it would save you more money
If your main goal for your student loans is to save money and get a lower interest rate, then refinancing your student loan may be a good option for you. Refinancing a student loan allows you to get a lower interest rate, lower monthly payments, or both. The rates are super cheap right now, and they start at 1.74%.
This student loan refinance calculator shows you how much you can save when you refinance student loans.
Suppose you have $ 60,000 in student loans with an interest rate of 8% and a repayment term of 10 years. If you refinance student loans with an interest rate of 2.5% and a 10-year repayment term, you could save $ 162 per month and $ 19,482 in total.
You can choose a fixed or variable rate as well as a repayment term of 5 to 20 years. You can refinance private or federal loans, or both, although if you refinance federal loans, the resulting loan is private and will not be eligible for federal benefits. To qualify, you will need at least a credit score of 650, be currently employed or have a signed job offer, and a stable monthly income.
With student loan relief ending in a few weeks, it is essential that you prepare for the resumption of student loan repayments. Make sure you understand all of your choices. Here are some popular ways to pay off student loans and save money:
Student loans: related reading
Biden confirms end of student loan relief
Biden won’t cancel student loans until student loan relief ends
How to qualify for the automatic student loan exemption
Education Department to Cancel $ 2 Billion in Student Loans