Here’s what borrowers need to know about the U.S. Department of Education’s plans to overhaul the student loan system.
Forbearances reassessed. Each forbearance can be as long as a year, and borrowers can tap the relief up to three times. However, interest accrues on borrowers' debt during the pause, and the companies that service federal student loans have been accused of too quickly steering people into them.
To try to lessen some of the pain of these pricey delays, the Education Department says borrowers who are on track for loan forgiveness — either through the public service loan forgiveness program or an income-driven repayment plan — may get some or all of the months they were enrolled in them counted.
"The remaining debt is supposed to be forgiven automatically," Kantrowitz said."But it's not possible to do this automatically if the loan servicer is not tracking the number of qualified payments" To fix this, the Education Department will order servicers to count the number of qualifying payments retroactively, he said.
Even if your loans were in a deferment or forbearance for a period, as mentioned before, that time may be counted now. Likewise, if you were enrolled in a payment plan other than a income-driven one, those months may also be applied to your timeline as a result of the audit., Kantrowitz said.The Biden administration has offered good news to borrowers who were behind on their student debt payments before the pandemic.
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