The key news regarding paying for college involves the restart of Federal Student Loan repayments this fall, the Supreme Court’s decision to prevent the Biden Student Loan Forgiveness plan to proceed, and the upcoming FAFSA changes. Read on for more detail.

Loan Repayment

The “Pandemic Pause” is ending, and the repayment of student loans will begin again in the fall. In negotiations to lift the debt ceiling a few months ago, it was agreed that repayments would resume.  The Biden administration is putting a policy into affect that will ease the penalties over the first twelve months for those who have trouble repaying.  The “12-month on-ramp,” was announced shortly after the Supreme Court Ruling was issued stopping the Biden debt forgiveness plan (CNBC) and was triggered by a CFPB estimate that 1 in 5 borrowers will have trouble resuming payments. (CNBC2)

The Biden administration has been working on a separate revision to repayment plans called “Saving on a Valuable Education” or SAVE. Some of the proposed provisions include $0 payments if you are making less than $15/hour.   Another proposal would be to allow those who borrowed under $12,000 to be granted forgiveness after 10 years of payments (rather than 20 or 25.) (Inside Higher Education)

Aftermath of the Supreme Court Rulings

What avenues still exist for student loan forgiveness or at least ways to pay less than the total owed? The NYT contributor Ron Lieber collected all the information with references to articles with clarifying details on existing plans. (Just remember that these apply to Federal, not private loans.)

• Income-Driven Repayment works as the name implies. If you cannot make the standard loan repayment, a formula is applied to your current income and a modified payment is calculated. Department of Education explanations can be found on its website.
  • After 20-25 years of making payments, the balance of your loan is forgiven. Through the pandemic, efforts have been made to give you credit in terms of months going towards the 20-25 years if you have ever been in forbearance and for the months of deferment allowed during the pandemic. These changes were covered by Ann Carns.
• Public Service Loan Forgiveness--where your debt is forgiven if you have worked for a qualifying organization and made all of your payments under an income-driven plan (on time) for ten years.
• Borrower Defense is an avenue to follow if you attended certain for-profit schools and were misled or the institution broke laws. You can petition for loan forgiveness. The Department of Education explains this on its website
• Bankruptcy Discharge is difficult to prove, but is possible to achieve. A lot depends on the judge, as you have to prove loan repayment is an “undue hardship.”
• Disability Discharge is available if you become totally and permanently disabled after taking out the debt. The Department of Education explains how this works in a new release.
• Debt cancelled upon death. If a relative took out a “Plus” loan to pay for your education, the debt is extinguished if they pass away—it does not pass on to you, the beneficiary of the loan.

There was  other big news recently on the forgiveness front as well.  Over 800,000 borrowers will receive a letter soon granting them loan forgiveness totaling $39 billion. These are people that should have qualified for forgiveness under one of the income-based repayment plans, but because of miscommunication and mismanagement by the loan servicers, were told they didn’t qualify. This followed a huge review of the broken system. (NPR) Read/listen to this article to get more detail, particularly if you think this might apply to you!

FAFSA Changes for 2023-24

Interest rates and fees for disbursements were announced for this year (Department of Education):

Other changes for 2023-24

• No longer have to register for Selective Service to be eligible.
• Drug convictions no longer prevent Pell eligibility.
• Federal Tax information can be populated directly from the IRS using the Data Retrieval Tool (DRT).
• Sex, race and ethnicity questions have been on the FAFSA—they are for research purposes only, not eligibility.

FAFSA Changes for 2024-25 (Saving for College) (CNBC)

• The start date for filing will be Decembber 1, 2023 instead of October 1 for just the first year of the new FAFSA.
• There will be only 46 questions, down from 108.
• IRS Data Retrieval will be mandatory (using DDE), therefore students and parents or spouses will need to get a FSA ID.
• You can list 20 colleges, up from 10.
• The Expected Family Contribution is now the Student Aid Index (SAI).
  • This calculation can be negative to differentiate the neediest students.
  • The number of college age students in a household is no longer a factor in the SAI calculation, which may hurt all but the lowest income families.
  • The Income Protection Allowance will be higher, and for this calculation, multiple college-age students will not reduce the number, partially offsetting the other negative impacts already mentioned.
  • Aid administrators will subtract a student’s SAI from the calculated cost of attendance to determine aid.
• Pell Grant calculations will change as well. But Those with SAIs between 0 and -$1500 will be eligible for maximum Pell Grants.
• Untaxed income will no longer be counted.  (Funds paid on behalf of students, such as grandparent 529 plan distributions.  This is BIG!)
• Child support will now be counted as an asset, not income, which will have a positive impact on eligibility for those families.
• Divorce and separation treatment has changed in a few ways. The key difference is that the parent who fills out the FAFSA must be the one who provides the bulk of the financial support, not the parent with whom the child resides.
• There are several changes to how Financial Aid Appeals are handled, but the key change is that schools cannot summarily deny all appeals. They must consider all appeals.
• Cost of Attendance is now calculated differently as well.
• There is no longer an Asset Protection Allowance.
• The threshold for not having to report assets has increased from $50,000 to $60,000.

For more details on the changes, I would suggest reading the Saving for College article.

Resources:

The Department of Education has a calculator/tool that allows you to investigate your repayment options. It is called the Loan Simulator.

Link to the new SAI calculations and Pell Eligibility descriptions (2024-25).

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.