The student loan market has seen a lot of changes in the last year, including the fourth extension of the student loan payment pause.
In 2021, it impacted both student loan borrowers and loan servicers, with student loan servicers exiting the business to revise the FAFSA application and a reorganization of the public student loan forgiveness program.
Furthermore, president Biden announced that the student loan forbearance term, which was scheduled to expire on January 31, 2022, will be extended. The payment suspension has been extended until May 1, 2022, providing loan borrowers and government loan servicers additional time to prepare for payment restoration.
Updates You Need to Know about The Student Loan
1. Some Student Loan Servicers Exist The Industry
Student loan servicers such as Granite State, Navient, and FedLoan opted to exit the servicing market, affecting about 15 million borrowers.
The timing could indeed be better. But, unfortunately, adding servicing modifications to an already challenging scenario for both borrowers and loan servicers when payments begin in May worsens what is already a challenging situation for both.
The logistics of shifting millions of borrowers’ accounts to new loan servicers will be a challenge for the sector.
Log in to studentaid.gov and check for the “my servicers” section if you don’t know who your new servicer is. Call the Federal Student Aid Information Center if you’re having trouble logging in.
2. Student Loan Payment Pause Ends In May
The Biden administration decided to extend the existing student loan payment suspension. The pause was supposed to conclude at the end of January.
The payment suspension will be extended until May 1, 2022. The months that have been suspended will continue to be registered towards loan forgiveness programs, such as Public Service Loan Forgiveness as if payments had been paid.
Borrowers must begin repayment once the payment stops expiring, and the PSLF program has strict conditions for qualifying repayment plans.
3. The FAFSA Application Form Has Been Updated
The FAFSA application is pretty confusing, complex, and time-consuming. So when the Federal Student Aid Office revealed forthcoming revisions to the FAFSA last year, it was excellent news for potential borrowers.
However, it appears that the alterations for 2022 will be primarily aesthetic. The only significant changes will be that a potential borrower’s ability to apply for financial aid will no longer be affected by a failure to register with the Selective Service System or a drug conviction, even though those questions will still be on the form in 2022.
4. New Details About The PSLF Changes
FedLoan Servicing, the Direct Loan Servicing, has been in charge of the PSLF program. FedLoan said last year that its contract with the Department of Education, which was slated to expire in December, would not be renewed.
This would necessitate the transfer of FedLoan Servicing’s 8.5 million borrower accounts to a new loan servicer, including all eligible students for PSLF.
PHEAA and the Department agreed to extend FedLoan’s contract for another year at the last minute, which only delayed the coming loan servicing transfers.
However, before the holiday season, the Department disclosed that a new loan servicer, MOHELA, had been selected to handle the PSLF program as a replacement servicer. As a result, borrowers who qualify for the PSLF program will have their accounts migrated from FedLoan to MOHELA in 2022.
Other borrowers who have federal loans serviced by FedLoan Servicing but are not eligible for PSLF will have their student loans assigned to other Education Department loan servicers such as Edfinancial, Aidvantage, and Nelnet.
5. Other Developments On Student Loan Forgiveness
The Justice Department and the U.S. Education Department are investigating whether the President has the legal ability to erase up to $50,000 in federal student loan debt by executive action. There is no set date for the release of these reports.
There may be delays because key policy advisors in both departments have yet to be confirmed by Congress. Whether student loan forgiveness is accomplished through executive action or legislation, the White House’s Domestic Policy Council will assess how it should be targeted.
You should avoid scams promising loan forgiveness in exchange for a fee. However, it will most likely be automatic and free when it comes to student loan forgiveness.
It’s crucial to know how your student loan rates may fluctuate, whether you’re new to student loans or deep into repayment. More chances for cheaper student loans or loan forgiveness may become available in 2022.
So keep up with the most up-to-date information.