July 22, 2024
Loans

Student Loans Change Today: Here’s Who’s Impacted


Millions of student loan borrowers no longer will be able to get their debts forgiven under President Joe Biden‘s administration beginning May 1.

Public service workers, including teachers and nurses, were able to get their debts cleared under specific Department of Education (DOE) rules, but that is no longer the case as of today.

The DOE is transitioning those public workers with federal student loan debt from student loan servicer MOHELA (Missouri Higher Education Loan Authority) into the federal agency.

Read more: Student Loan Forgiveness Updates and FAQs

Borrowers can expect that move to take through July, and during that time, roughly 2 million borrowers in the Public Service Loan Forgiveness (PSLF) program will see their forgiveness paused.

Student debt
President Joe Biden delivers remarks on new administration efforts to cancel student debt and support borrowers at the White House on October 4, 2023, in Washington, D.C. As the Education Department moves MOHELA’s programs under…


Kevin Dietsch/Getty Images

Previously, borrowers working in public service could see their debt canceled after making 120 monthly qualifying payments.

However, Michael Lux, an attorney and founder of the Student Loan Sherpa, cautioned borrowers against panicking upon hearing the news.

“For most public service workers, the pause will amount to nothing more than a minor inconvenience,” Lux told Newsweek. “Borrowers can still earn progress toward PSLF for these months, it just means there will be a lag in processing time.”

Those receiving grants from the Teacher Education Assistance for College and Higher Education (TEACH) program will also see grants paused. That’s because the program is run by MOHELA, so some could be on the hook for the money during this window of time.

Read more: How to Consolidate Student Loans

The DOE moving the Public Service Loan Forgiveness under its leadership is just one major change coming its way. The department also said it would be improving its administrative processes over the next few years to better serve borrowers.

“This pause allows for the implementation of streamlined processes and centralized management, which is anticipated to make the application and management process more efficient in the long run,” Robert Farrington, founder of The College Investor, told Newsweek.

“During this pause, borrowers may experience inconvenience in accessing progress and certified employment information. However, a temporary halt is necessary for the integration of a more efficient system, which will ultimately benefit borrowers by simplifying the loan forgiveness process.”

Previously, borrowers reported they had been told to go into forbearance by student loan servicers despite being able to make qualifying payments and achieve the requirements for Biden’s student loan forgiveness.

Biden’s administration has approved debt relief for around 876,000 borrowers under the program, which translates to $62.8 billion cleared.

But starting this month, an estimated 1 million borrowers will see their loans transferred from MOHELA. During this time, monthly payments will still be due.

Borrowers are still able to submit forms to prove their work situation or apply for forgiveness under the program, but applications won’t be reviewed until the transition process is complete in July.

If you are forced to make more payments than necessary during this time, such as making a payment beyond the 120th needed to reverse your debt, the DOE said it will refund the borrower or apply the additional payment to other debt.

“With the systems down, and truly no access to your account, you are supposed to continue to pay your loans even though there is truly no online presence to do so,” Kevin Thompson, a finance expert and the founder of 9i Capital Group, told Newsweek. “Borrowers will not be able to see their progress until the transition is complete.”

Read more: How Much Financial Aid Can I Get?

Lux said once the PSLF program operates fully under the DOE, borrowers will likely be able to see their progress on student loan payments more clearly.

“The hope for borrowers is that the new system managed by the Department of Education is more transparent and easier to manage than the current MOHELA system,” Lux said.