On October 31, the Department of Education announced large-scale changes to the federal student loan system. These changes come as the Biden administration’s broader student loan forgiveness plan is held up by legal challenges.
Education Secretary Miguel Cardona called the new rules, “a monumental step forward in the Biden-Harris team’s efforts to fix a broken student loan system.” The following changes are scheduled to go into effect on July 1, 2023.
- Interest capitalization—where unpaid interest is added to the borrower’s principal, resulting in borrowers owing more than the original loan amount—will be significantly curbed.
- Rules and restrictions that have historically impeded the Public Service Loan Forgiveness program, which allows borrowers who work for the government or specific nonprofits to have their debt canceled after a decade, will be overhauled.
- ‘Borrower Defense’ rules will be simplified. This program allows students who were misled or defrauded by their schools to discharge some or all of their student loan debt.
- Paperwork will be simplified and a broader range of circumstances will be available to borrowers who are eligible for relief because they have become totally and permanently disabled.
For more details on these new rules and changes, read the full news release from the Department of Education here: https://www.ed.gov/news/press-releases/education-department-releases-final-regulations-expand-and-improve-targeted-debt-relief-programs