Student Loan News
Federal student loan borrowers haven’t made payments or had interest accruing in over three years. Finally, we think the payment and interest pause is coming to an end this summer, with payments set to resume either 60 days after the Supreme Court renders a decision in the student debt relief case or 60 days after June 30, 2023, whichever is earlier. At this time, we can estimate that payments will resume around September 1, 2023.
To prepare for the resumption of payments, follow these steps:
- Log into studentaid.gov to take an accounting of your loans and review your loan servicer.
- Log into your loan servicer’s account, update your contact information, and reauthorize or set up autopayments.
- Review your payment details and plan. If you’re planning on LRAP and/or PSLF, make sure you’re enrolled in an Income-Driven Repayment plan (see more details below).
- If you need LRAP support, you should apply in July or August. We’ll update you with more details as we learn more about the resumption of repayment.
- Make sure you’re taking action early and not waiting until the last minute. You could miss a payment or end up in an unaffordable payment plan.
- Review your budget and prepare for an increase in expenses now.
- Getting ahold of your loan servicer can be challenging right now. Be patient; you may need to call multiple times or use the live chat feature. If you need to get ahold of your servicer, set aside some time to account for long holds.
- Keep documentation of your payment plan, payments, PSLF and IDR applications, and correspondence with your servicer.
To mark Public Service Recognition Week, the U.S. Department of Education (Department) today announced that, as of the beginning of May 2023, it has approved a total of $42 billion in Public Service Loan Forgiveness (PSLF) for more than 615,000 borrowers since October 2021. This is a result of the temporary PSLF changes made by the Biden-Harris Administration that made it easier for borrowers to reach forgiveness. At the end of the previous Administration, only about 7,000 borrowers had been approved for the PSLF program. Read more about the latest improvements on Department of Education website.
As of Spring 2023, borrowers and their employers can now sign and submit PSLF Forms digitally via DocuSign using the PSLF Help Tool. These updates will, for the first time, let borrowers complete the entire PSLF application process online, and borrowers will no longer need to fax or mail in their application with a wet signature, which will hopefully reduce processing time. In addition, borrowers can now digitally track the status of their PSLF form in the My Activity section of their StudentAid.gov account, where they can see updates such as whether their employer has digitally signed their PSLF form and when their form has been processed.
In April 2022, the Department of Education announced changes that will allow borrowers to reach forgiveness under the Income-Driven Repayment (IDR) plans and Public Service Loan Forgiveness (PSLF) sooner. The Department has continually updated this guidance over time, with changes announced in October 2022 and beyond.
Under the new guidance, borrowers will now receive credit toward PSLF and IDR 20-25 year forgiveness for:
- Any month in which a borrower was in a repayment status, regardless of loan type, repayment plan, or whether payments were partial or late;
- Any month in which loans were in repayment, deferment, or forbearance status prior to consolidation;
- Months while a borrower spent 12+ months of consecutive forbearance;
- Months while a borrower spent 36+ cumulative months in forbearance; and
- Any month spent in deferment prior to 2013 (exception for in-school deferment).
Borrowers who have commercially-held FFEL loans, Perkins loans, or HEAL loans who want to benefit from these changes should apply for Direct Loan Consolidation by the end of 2023. However, be cautious: loans consolidated after 9/29/22 comprising of underlying FFEL or Perkins loans aren’t eligible for Biden’s $10,000 – $20,000 loan forgiveness. Borrowers may need to weigh their options to determine what makes most sense and will allow them to reach total loan forgiveness sooner.
Borrowers who have 20 – 25 years of qualifying IDR payments, and/or 120 months of qualifying PSLF payments under the new guidelines will start to see their loans forgiven in spring 2023. All other borrowers will see their accounts update in 2024.
Today the Department of Education announced proposed changes to the REPAYE plan that would make student loan payments more affordable.
REPAYE (Revised Pay As You Earn) is an existing Income-Driven Repayment plan. Currently, REPAYE requires monthly payments equal to 10% of a borrower’s discretionary income, which is all income above 150% of the federal poverty standard.
The new proposed regulations recommend changing the discretionary income calculation for all borrowers to be income above 225% of the federal poverty standard, thereby reducing monthly payments.
Additionally, the proposed regulations reduce monthly payments to be just 5% of discretionary income for undergraduate loans. Graduate school loans will still require a monthly payment equal to 10% of a borrower’s discretionary income. Borrowers with both undergraduate and graduate school loans will pay a weighted average rate of their discretionary income between 5 and 10 percent based on the share of their original loan balances.
Significantly, borrowers in this new plan will not see their interest negatively amortize–or grow–even if their payments aren’t high enough to cover the accruing interest each month.
Borrowers with original balances of $12,000 or less will be able to have their remaining loan debt forgiven after 10 years—a reduction of the 20 to 25 year IDR forgiveness plans in place now. Every additional $1,000 borrowed above that amount will add 1 year of monthly payments to the required time a borrower must pay before receiving forgiveness–up to 20 years for borrowers with only undergraduate loans and 25 years for borrowers with graduate loans. These time-based forgiveness plans are separate from 10-year Public Service Loan Forgiveness.
The proposal would streamline IDR plans by limiting future enrollment in the PAYE and ICR. New borrowers entering repayment will be able to choose between REPAYE and IBR; older borrowers already enrolled in PAYE or ICR could remain in their existing plan or switch to REPAYE or IBR.
This proposed rule needs to go through the comment period. Once the rule is finalized, our office will make a determination about how this may affect LRAP participants and the LRAP program.
The Biden-Harris administration just announced another federal student loan payment pause extension into 2023. Because $10k – $20k debt relief is currently held up in the courts, the administration is extending the pause to allow SCOTUS to review the lower court orders and, ideally, implement their plan.
When will payments start up again? Payments will resume 60 days after the Department of Education is permitted to implement the program or the litigation is resolved. If the program has not been implemented and litigation has not been resolved by June 30, 2023, payments will resume 60 days after that.
The Eighth Circuit Court of Appeals and the District Court for the Northern District of Texas have both blocked Biden’s $10k – $20k debt relief plan. The application is now closed as appeals make their way through the courts.
On November 1, 2022, the Department of Education announced new regulations governing the Direct Loan program and PSLF that will go into effect on July 1, 2023. The big changes include:
- Unpaid interest will no longer capitalize in when not statutorily required, including when borrowers enter repayment, exit a forbearance, annually after periods of negative amortization under the alternative or ICR plans, when a borrower defaults, and when borrowers on the PAYE or REPAYE plans fail to recertify their income or exit the plans.
- Partial, late, and lump sum payments now qualify for PSLF. Payments can qualify for PSLF if borrowers: pay at least the full scheduled payment amount, or; pay in multiple installments that equal the full scheduled amount, or; pay a lump sum equal to or greater than the scheduled amount in advance of the due date. Borrowers paying in lump sums can now be “pre-paid” up to 12-months in advance or their next IDR annual certification date, whichever is earlier. Previously, payments had to be on-time, made each month, and in the correct amount to qualify, and borrowers who paid more were penalized.
- Full-time employment for PSLF will now be just 30 hours a week. Previously, borrowers had to either meet their employers’ definition of full-time or work 30 hours a week, whichever was greater. Employers can implement this provision before 7/1/23 at their discretion.
- Borrowers must receive a W-2 from a qualifying employer to qualify for PSLF. This is a change from the previous “hired” and “paid by” language.
- Payments can qualify so long as a borrower was employed at any point during the month the payment is credited. Previously, borrowers had to be employed on the exact date they made a payment.
- Borrowers will no longer lose all credit toward PSLF after loan consolidation, but the new consolidation loan will be awarded the number of qualifying payments equal to a weighted average of the loan balances. For instance, if a borrower has 60 qualifying payments on a $20,000 loan and consolidates that loan with $40,000 in loans with no qualifying payments, then the consolidation loan would be assigned 20 qualifying payments. This is a change from the prior rule which would reset all new consolidation loans’ qualifying payments to 0.
- Borrowers in certain deferments and forbearances can receive credit for PSLF. The cancer treatment deferment, economic hardship deferment, military service deferment, post-active-duty student deferment, AmeriCorps forbearance, and National Guard duty forbearance now qualify for PSLF assuming borrowers are working full-time in PSLF-qualifying employment. For all other forbearances and deferments, borrowers can receive credit as part of a new “hold harmless” option. Borrowers will be able to go back and make payments equal to or greater than what they would have paid to count that time toward PSLF.
- For NGOs that are not 501(c)(3)s, employers must have a majority of their full-time equivalent employees be working in one of the following areas: emergency management, civilian service to military personnel, public safety, law enforcement, public interest law services, early childhood education, public service for individuals with disabilities or the elderly, public health, public education, public library services, school library, or other school-based services. This is a clarification from the prior “primary purpose” rule the Department used to use when determining whether a non-governmental organization qualified for PSLF.
- Teachers and instructors will be considered full-time employees for PSLF if they are contractually employed at least 8 months over a 12-month period. Non-tenure track faculty will be considered full-time employees for PSLF if: they teach at least 9 credit hours per semester, 6 credit hours per trimester, or 18 credit hours per calendar year, or; if they multiple each credit hour taught by 3.35 hours and that number is 30+, or; if they have 30+ student-contact hours by self-attestation substantiated by the employer.
- Independent contractors can now qualify for PSLF under narrow circumstances. Borrowers working as contracted workers for a qualifying employer in a position or providing services which, under applicable State law, cannot be filled or provided by a direct employee of the qualifying employer, can now qualify for PSLF.
- Borrowers can request reconsideration of their PSLF denial within 90 days of notice.
You can read the final proposed rules here.
Taking one of the most significant actions around student debt in a generation, the Biden-Harris Administration announced today a plan to provide targeted student debt cancellation to millions of federal student loan borrowers.
Some borrowers will see one-time debt cancellation of up to $10,000 – $20,000. Your eligibility and the amount of forgiveness depends on your income and whether you received a Pell Grant in undergrad.
- Borrowers with incomes under $125,000 (individuals) or under $250,000 (households), who received a Pell Grant in college, and who have federal student loans held by the Department of Education with a remaining loan balance, can receive up to $20,000 in loan forgiveness.
- Borrowers with incomes under $125,000 (individuals) or under $250,000 (households), who did not receive a Pell Grant in college, and who have federal student loans held by the Department of Education with a remaining loan balance, can receive up to $10,000 in loan forgiveness.
The changes apply to borrowers with federally-held undergraduate, graduate, and Parent PLUS loans disbursed by June 30, 2022. All student debt forgiven between December 31, 2020 and January 1, 2026 is not considered federally taxable income, so any debt canceled under the new proposal will not affect your federal tax return. Depending on your state, debt cancellation may be subject to state income taxes.
The Department of Education will use your income from 2020 or 2021. If your income was below the limits for one or both of these years, you will be eligible for forgiveness. For those who are currently in Income-Driven Repayment plans, or recently filled out a FAFSA, the Department of Education may use the income information already on hand. For others, there will be a short application released by early October.
More questions? Visit Federal Student Aid’s debt relief FAQs.
The Department of Education announced last week that it will begin transferring PSLF student loan accounts from FedLoan Servicing to MOHELA. The first group of borrowers can expect the transition to occur in early July, with transfers happening through the summer and fall.
Borrowers will receive five notices as their accounts are transferred to prepare for and monitor the transfer. For your PSLF records, make sure you download and save everything from FedLoan Servicing’s website before the transfer, including:
- IDR plan approval letter
- Full payment history details
- PSLF Forms and employment records
- Correspondence with your servicer
As of July 2022, MOHELA is now the servicer accepting and processing new PSLF Forms. Please submit all new PSLF Forms to MOHELA, per the Department of Education’s instructions. Reach out to FedLoan Servicing by mail if you need old records.
On August 19, 2021, the Department of Education announced that it was automatically discharging student loan debt for some borrowers with a total and permanent disability (TPD). Borrower identification will occur through a matching program with the Social Security Administration. The discharge is expected to affect over 323,000 borrowers and discharge over $5.8 billion in student debt.
One of the defining characteristics of Berkeley Law is its public mission. Integral to this goal is supporting our graduates working in public interest after law school. Over the past few years, we’ve made a number of programmatic improvements to our Loan Repayment Assistance Program (LRAP), in addition to increased outreach and communications. Today, we’re pleased to announce our most impactful policy change yet.
Starting October 1, eligible graduates earning up to $120,000 can now receive LRAP support, up from our previous $100,000 income cap. This change means more graduates can now take advantage of LRAP’s support. Additionally, our out-of-pocket contribution formula is changing. Graduates making $80,000 a year receive 100% LRAP support for their income-driven student loan payments, resulting in no out-of-pocket costs. Graduates making over $80,000 and up to $120,000 will now pay just 25% of their income over $80,000 toward their loans out-of-pocket, a reduction from our previous formula requiring a 35% contribution. This change means public interest graduates will now receive more LRAP funding and will need to spend less of their own money on student loan expenses.
With these improvements, Berkeley Law’s LRAP is assuredly the best program of any public institution and now has one of the lowest out-of-pocket contribution formulas of any LRAP, even among private institutions. Our LRAP excels in other ways, too. Compared to other LRAPs, Berkeley Law’s program has broad eligibility requirements that allow anyone working in law-related, public interest employment to qualify for funding. Our LRAP gives participants the flexibility to enter and exit the program at will, allowing graduates to follow their ideal career paths. And Berkeley Law maximizes LRAP support by not considering assets, allowing for dependent deductions, and protecting a limited amount of side job income.
For an overview of all of LRAP’s policies, please read the latest LRAP Handbooks. Should you have any questions, please contact Berkeley Law’s LRAP team at email@example.com.
Worried about meeting the 3.5 year LRAP deadline? You can now apply to pre-qualify for 120 months of LRAP funding without having to submit an LRAP application.
To pre-qualify, you need to be 1) in greater-than-half time and paid law-related, public interest work making under the LRAP income cap; 2) be in repayment (not in school, in a grace period, or in a forbearance or deferment (the automatic COVID forbearance doesn’t count)); 3) be enrolled in an income-driven repayment plan; and 4) have a $0 monthly payment.
You must submit both an Employer Verification Form and documentation of your $0 payment to apply.
One of Berkeley Law’s defining characteristics is its public mission and commitment to supporting our students and graduates pursuing careers in public service. Our Loan Repayment Assistance Program is crucial in this regard. We are pleased to announce a programmatic change to Berkeley Law’s Loan Repayment Assistance Program to make it more generous for our graduates. Effective August 1, 2021, LRAP’s out-of-pocket contribution income threshold will increase from $70,000 to $80,000. In short, this change will allow more graduates to receive a greater amount of LRAP support, consistent with Berkeley Law’s commitment to public interest and public service graduates.
Starting August 1, LRAP will cover 100% of all eligible loan payments for LRAP participants with annualized full-time incomes of $80,000 or less. For participants making over $80,000, LRAP assistance will be prorated. As a result, more participants will be able to have 100% of their eligible loan payments covered, and more participants with incomes above $80,000 will be eligible for LRAP support with a smaller out-of-pocket contribution.
To calculate your LRAP eligibility, use our LRAP Calculator.