What You Need to Know About Upcoming Changes to U.S. Student Debt
This is the fourth and final part of our four-part series that looks at the debt burden facing U.S. borrowers today – and the post-pandemic policy changes that will shake it up – created with career data journalist Emily Barone.
If you’ve been following the series, you know we’re on a quest to help you decode the labyrinth of student loans.
After exploring the details of what makes up student debt in the U.S. and across the world in Part 1, we then looked at their growth and the effect of the pandemic in Part 2, followed by an analysis of how student debt repayment differs across student populations in Part 3.
But what about the future? In this installment, we’re about to pull back the curtain on what lies ahead. Trust us, you won’t want to miss this. Let’s get into it!
The road ahead
A number of milestones concerning new federal loan repayment plans will be popping up between September 2023 and September 2024.
Here are the dates to keep in mind:
Ongoing considerations
- Applications for the SAVE program (see here) are available through the Department of Education website. Borrowers who are already enrolled in the “REPAYE” income-driven repayment (IDR) plan will automatically be moved to the SAVE plan. Not all the SAVE program’s features will come online simultaneously.
- Immediately under the SAVE plan, income exemption will be raised from 150% to 225% and interest accrual will become a thing of the past (so long as monthly payments are made). But other benefits will roll out next summer (noted below in the timeline).
- Borrowers who defaulted on their student loans before the pandemic can apply for a “Fresh Start” plan, which was announced in 2022. The program offers borrowers an opportunity to get their loan status changed from “default” to “current.”
- In an effort to account for complex rules and poor communication that unduly burdened borrowers who could have benefited from an IDR plan, the government is rolling out one-time IRD Account Adjustments this year to more than 800,000 borrowers. The first notifications went out in July alerting borrowers that they qualified for loan forgiveness under the Adjustment. Waves of approvals will occur every two months through 2023.
Key dates for student loan debt
01 Sep 2023
Interest starts accruing again
- Following a three-year pause due to the pandemic, interest will once again accrue on federal student loans.
Oct 2023
Payments come due again
- Payments for federal student loans will come due again in October. While exact dates will vary, borrowers will be notified at least 21 days before their payment is due. However, there is a yearlong “on-ramp” period to give borrowers more time—without repercussion—to gear up for monthly payments.
31 Dec 2023
IDR Account Adjustment deadline
- This is the deadline to be considered for IDR Account Adjustment. Borrowers who have indirect loans (see here) such as Federal Family Education Loans (FFEL), school-held Perkins Loans, or a Health Education Assistance Loan (HEAL), need to consolidate those loans into a new Direct Consolidation Loan before the end of the year to get credit for them through the IDR Account Adjustment plan.
01 Jul 2024
Final pieces of the SAVE program kick in
- Under the SAVE program, payments will be halved (from 10% to 5%) of discretionary income. Borrowers who have undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income based on the original principal balances of their loans.
- Also under the SAVE program, remaining loan balances will be forgiven for borrowers who had original principal balances of $12,000 or less and who made payments for at least 10 years.
31 Aug 2024
Fresh Start application deadline
- Last day for borrowers to apply for the Fresh Start program.
30 Sep 2024
Last day of "on-ramp" period
- This is the last day of the yearlong “on-ramp” period to help borrowers adjust to paying monthly instalments. Unpaid student loans will again be considered delinquent.
What can college students expect in the future?
After a three year hiatus due to the pandemic, student loan borrowers will once again have to start repaying their loans. At the same time, the administration is rolling out new programs over the coming year to make repayments for federal loans more affordable.
As established in this report, these new measures are long overdue, following decades of crushing debt burden that likely would have continued to increase had it not been for the pandemic, which disrupted enrollment, college costs, and government repayment terms. Under the new forgiveness and repayment programs (including the SAVE plan) the country is about to enter a new era. The programs rolling out currently and through 2024 will impact both existing borrowers and also students who will be taking out loans to attend college in the coming years.
It’s impossible to say exactly how this new period will impact graduated, current, and future students. But it’s an exciting time to watch it play out.
Studocu, like many organizations that have a keen interest in student achievement, will be watching to see what’s working and what isn’t. Below are a list of issues, questions, and measures we plan to keep an eye on as we believe each could impact student success, both in the classroom and beyond.
#1
Affordability and accessibility in the new era
As established in this report, certain groups, including first-generation students and some minority groups, face significantly more barriers to education and to repay their loans after leaving school. We will be looking to see if the new repayment programs are accessible and if they are targeting the right demographics, allowing education to be more affordable and more equitable.
#2
Impact on personal mental health and household finances
After three years, resuming payments is bound to affect borrowers’ mental health and stress levels. Much of this stress will stem from additional pressure on household finances. As covered in the report, roughly half of borrowers did not continue to pay down their loans during the pandemic hiatus, so these borrowers will be forced to adjust their household finances to (re)accommodate the burden.
#3
Career choices and broader economic impact
As discussed in this report, heavy loan burdens have debilitating consequences on personal finances. They also contribute to high drop-out rates and shape career choices. All of these post-college decisions feed into, and help to shape, the health of the broader economy. We will be looking to see whether new repayment trends translate into broader economic impacts.
#4
Ongoing shifts in institutional behavior
At Studocu, we are keenly interested in what’s happening on campuses around the world. As the U.S. enters a new era of education through its more accessible loan repayment programs, we’ll be checking in on acceptance rates and tuition rates, particularly in light of the data observations in this report indicating that historical government attempts to make college more affordable (such as grants) can result in higher cost.
That's a wrap!
Wow, what a journey we’ve been on together! From understanding the basics of student loans to peeling back the layers on growing debt and repayment struggles, we’ve finally arrived at the future changes that could turn things around. If you’ve been with us from the start, give yourself a pat on the back—you’re now way ahead of the curve when it comes to navigating the world of student loans!
Sharing this is a part of our commitment to creating a more level playing field in education across the world.
Want to see the full report with the detailed analysis? Download it here