The Biden-Harris administration also intends to simplify income-driven repayment plans. Currently, income-driven plans adjust your student loan payment to 10% to 20% of your discretionary income while extending your loan terms to 20 or 25 years.
With the latest changes, you could see your payment go down to 5% of your discretionary income for undergraduate loans. Plus, the government could cover your unpaid monthly interest, and your repayment term will only span 10 years. After 10 years, you could see your remaining balance canceled.
While these changes are not yet in effect, you can still apply for various federal repayment plans. These include:
- Standard plan, with fixed payments over 10 years.
- Graduated plan, which spans 10 years and involves payments that start smaller and increase over time.
- Extended plan, with fixed or graduated payments over 25 years.
- Income-driven repayment plans, which include Income-Based Repayment, Pay As You Earn, Revised Pay As You Earn, and Income-Contingent Repayment.
You can also combine your federal loans into a Direct consolidation loan. After consolidating, you can choose any repayment plan or a term of up to 30 years, depending on your loan amount.
Read on for other options for student loan relief worth exploring when the moratorium ends.
Student loan forgiveness programs
There are government-sponsored programs that offer student loan forgiveness for those with specific qualifications. One of the most popular student loan forgiveness options is the Public Service Loan Forgiveness (PSLF) Program, which promises forgiveness of federal student loans to government and qualifying nonprofit employees. Eligible borrowers can have their remaining loan balance forgiven after making 120 qualifying loan payments.
Some other loan forgiveness programs to look into include:
- Teacher Loan Forgiveness Program –Teachers employed full time in low-income public elementary or secondary schools may be eligible for Teacher Loan Forgiveness after working for five consecutive years. If you qualify for this relief, you can receive up to $17,500 in loan forgiveness, depending on the subjects you teach.
- Nurse Corps Loan Repayment Program – If you’re a licensed registered nurse, an advanced practice registered nurse, or a nurse faculty member with qualifying nursing debt, you may be eligible for the Nurse Corps Loan Repayment Program. This program pays up to 85% of qualified nurses’ unpaid college debt.
- Military student loan forgiveness – Military personnel in the Army, Navy, Air Force, National Guard, and Coast Guard may qualify for their own loan forgiveness programs.
- State-sponsored repayment assistance programs – Licensed teachers, nurses, doctors, lawyers, and other professionals in certain states may be able to take advantage of programs to assist with student loan debt relief.
These are just some of the loan forgiveness programs available for student loans. Apply for any programs for which you qualify (just make sure to steer clear of any potential student loan forgiveness scams).
Student loan forbearance or deferment
If you need more time to repay your loans after the federal pause ends, you’ll have to ask your lender to put your loans into either forbearance or deferment. Loan forbearance allows you to postpone monthly payments for specific periods but, depending on the forbearance program, interest on your loan may still accrue.
In contrast, loan deferment is a federal repayment program that allows you to pause or reduce your student loan payments for up to three years. Depending on the type of loan you have, you may or may not be responsible for interest charges that accrue on your loan. For both forbearance and deferment, you will need to apply with your loan servicer and meet eligibility requirements.
Student loan assistance from your employer
Some employers are beginning to offer employees help for student loan debt repayment. One way employers do this is by offering tax-free contributions to an employee’s student loans. One provision of the CARES Act allows employers to make payments of up to $5,250 tax-free toward employees’ student loans until 2025. An employer could offer an employee a fixed monthly payment or contribution toward eligible education expenses outside the employee’s gross taxable wages.
Another way companies are helping with student loan debt: implementing a matching program to employees’ retirement plans for every payment they make to their student loan debt. Ask your employer what programs and contributions they have in place to help relieve the burden of student loans.
Student loan refinancing
Refinancing your student loans could qualify you for a lower interest rate, saving you money in the long run. You can also refinance multiple loans, combining them into one single loan to simplify repayment. Before going down this path, it’s important you understand that refinancing federal loans converts them to private loans. As a result, you’ll lose access to federal loan protections such as forgiveness programs and repayment plans.
