From the kick-off of SECURE Act 2.0 student loan retirement matching to the yet-unknown impacts of the upcoming presidential election, 2024 is going to be a huge year in the world of student loans — and it’s already off to a running start.
Get caught up on the most buzzed-about student loan stories of the moment:
Some borrowers will receive SAVE forgiveness ahead of schedule
The Saving on A Valuable Education (SAVE) plan may still be less than a year old, but the repayment plan has already gained impressive traction: 6.9 million borrowers have enrolled in the plan, which was announced last summer and offers potentially lower monthly payments and may help borrowers qualify for loan forgiveness sooner than they would through other repayment plans.
Certain benefits of SAVE were made available as soon as the plan launched, but other provisions, including the plan’s expedited debt forgiveness timeline, weren’t scheduled for implementation until July 2024.
However, President Biden last month announced that certain borrowers will get their remaining federal student debt wiped away much sooner than originally expected. The Department of Education (ED) will begin issuing forgiveness in February, starting with borrowers who are enrolled in SAVE, borrowed less than $12,000 in federal loans, and have already been in repayment for at least 10 years. Moving forward, ED will continue issuing forgiveness to borrowers as they meet the plan’s eligibility requirements.
Still slated for this summer is the implementation of a change to how borrowers’ monthly payments are calculated under SAVE. Starting in July, monthly payments for undergraduate loans will drop from 10 to just five percent of the borrower’s discretionary income; borrowers with only graduate loans payments for graduate loans will pay 10 percent of their discretionary income, and borrowers with both undergraduate and graduate loans will pay a weighted average between five to 10 percent of their discretionary income, based on their original loan balance. With 3.9 million borrowers already assigned a $0 required minimum monthly payment under SAVE’s current payment calculation, this change will reduce — and in some cases, eliminate — monthly payments for millions more.
Another loan servicer shakeup is coming soon
Navient, one of the largest student loan servicing companies, last week announced that it will transfer its portfolio of private student loans and commercially held federal FFEL loans to MOHELA, another major player in the student loan servicing space. 2.7 million borrowers will be impacted by the transfer, which may take up to two years to complete.
While Navient and MOHELA have promised a “seamless” and “uninterrupted” experience for borrowers during the transition, advocates have raised concerns that the transition could cause problems for borrowers, citing both companies’ troubling track records. Navient has long been accused of acting against borrowers’ best interests, while MOHELA came under fire last fall after failing to send billing statements to 2.5 million borrowers, an oversight that Secretary of Education Miguel Cardona called a “gross servicing failure” that would “not be tolerated.”
New developments in Biden’s Plan B for debt relief
ED last week announced it will hold an additional rulemaking session later this month to discuss strategies for supporting borrowers facing financial hardship with Biden’s so-called “Plan B” for student debt relief. The session will build on three previous discussions that took place last fall, after which advocates raised concerns that the administration’s proposed relief plan does not provide sufficient support to the most vulnerable borrower populations.
While the exact details of Biden’s Plan B are still being determined, terms proposed thus far include debt cancellation for specific borrower groups, such as those who owe more than they originally borrowed and those who have been in repayment for at least 25 years. This targeted approach to debt relief is in response to the outcome of Biden’s original plan for widespread student loan forgiveness, which the Supreme Court struck down last summer after deeming it to be too far-reaching.