What Biden’s new undersecretary of education means for student loans?

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College student loan reform was a huge platform for Joe Biden’s campaign. But once Biden became president, the question became: How will the new administration tackle student loan debt? Although there has always been a loud contingent hoping for student loan cancellation, Biden and his administration have publicly supported proposals forgiving $10,000 of student loan debt.

When James Kvaal was nominated as undersecretary of education, people began parsing his record and answers during his Senate confirmation hearing for clues as to what position he would take on student loan forgiveness.

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Related: Why are student loan interest rates so high?

What is Kvaal’s stance on student loan forgiveness?

Kvaal is the former president of the Institute for College Access & Success, a think tank promoting “affordability, accountability and equity” in higher education. He is no stranger to the government, having filled several roles in the Obama administration, where he worked to expand income-based repayment, strengthen Pell Grants and increase state and federal investments in higher education. He also played a key role in the administration’s regulatory battle with for-profit colleges.

At the Institute for College Access, Kvaal supported student loan forgiveness. In October 2020, the think tank recommended that Congress “explore tax-free cancellation of some or all outstanding debt of borrowers whose loans have clearly not paid off and are not on a trajectory to do so.”

In confirmation hearings, he emphasized three components: Address debt that students can’t afford to repay; make college more affordable for current and future students, which “means investing in eliminating tuition at public colleges and universities” and “doubling Pell Grants;” and focus on institutions that serve the highest number of low-income students and students of color.

While leaders in higher education largely supported Kvaal’s nomination and background, his Senate hearing included pointed questions by Republican senators about how progressive policies may affect federal taxpayers.

Sen. Richard Burr of North Carolina noted that currently, states aren’t required to subsidize education fees at public universities. If tuition were to be eliminated or severely reduced at public universities, who would subsidize the bill? Kvaal said a “new partnership” between the federal government and the states was needed to make sure resources were allocated fairly to public institutions.

What can student loan holders expect?

Right now, the federal student loan payment pause without accruing interest will end on Jan. 31, 2022. The order includes most federal student loans—excluding older Federal Family Education Loan (FFEL) Program and Perkins loans owned by commercial lenders—and does not apply to private student loans.

The moratorium gives the administration some breathing room on next steps. Biden has asked the Department of Education to study whether he alone can cancel student loan debt, but it is likely he will attempt to pass any expansive higher education policy through Congress.

While student loan forgiveness has become a popular discussion point for both parties—and The Harris Poll recently found that 64% of Americans support a set amount of student debt forgiveness—congressional gridlock may make it unlikely in the near future. A separate survey found that only 13% of current college students believe that student loan forgiveness will actually happen.

And while outright forgiveness has become a topic of frequent discussion, loan payments may shift during the Biden administration. For example, some key plans Biden outlined during his campaign included:

  • Eliminating student loans entirely for people making under $25,000 a year.
  • Permitting student loan debt to be discharged during bankruptcy.
  • Overhauling Pay as You Earn (PAYE) and Revised Pay as You Earn (REPAYE) programs to lower the percentage of discretionary income paid back. These programs would also not tax any forgiven amount of the loan.
  • Overhauling the Public Service Loan Forgiveness program.

Some members of Congress, including Sens. Elizabeth Warren and Chuck Schumer, have asked for up to $50,000 of federal student loan debt to be canceled. Biden has asked Education Secretary Miguel Cardona if he has the power to unilaterally cancel that much debt.

What are next steps for student loan holders?

With federal student loan payments paused, this could be a good time for borrowers to assess next steps. Borrowers who can afford to do so may continue to make payments to lower the principal on their loan balance.

It can also be a good time to explore refinancing, especially if you have private loans. The current low-interest rate environment maintained by the Fed means some private lenders have lowered their rates. Exploring the pros and cons of refinancing, including fees and penalties, may make sense to borrowers.

It’s important to remember that refinancing federal loans means forfeiting eligibility for federal protections, which would include forgiveness if loan forgiveness were offered exclusively to federal student loan holders. But for some borrowers, assessing their financial situation now and considering options, including refinancing some or all of their loans, could help them build a plan for paying back loans based on the information available now.

What is clear is that change is on the horizon—but it’s unclear how long this change may take. Paying attention to headlines and government action in the next few months should hopefully give more clarity. The expiration of the federal loan payment pause, set for Jan. 31, 2022, may also lead to urgent federal action in the months ahead.

What can future college students expect?

Kvaal’s impact may be felt more acutely by current high school and middle school students. While student loan forgiveness has received outsize attention, the Biden administration has ambitious plans to rework higher education, making it more affordable for students. Some of these plans that aren’t yet finalized include:

  • Free college for those making under $125,000 a year
  • Expanded Pell Grant eligibility
  • Double Pell Grant values
  • Free two-year colleges and training programs
  • Programs for low-income and minority students

Again, these initiatives would likely require bipartisan support in Congress and may take time to implement.

The takeaway

President Biden’s choice of higher education policy veteran James Kvaal may be forecasting change, but it is hard to determine how sweeping it may be. Reforms may take time and may be incremental. Borrowers can use what is known right now to create an action plan for student loan repayment.


Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE  FOR MORE INFORMATION.


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Private vs. federal student loans

Getting accepted to college may seem exciting on the surface, but in reality, it’s only half the battle. After you’ve filled out your applications and decided on a school, you’ll then need to fund your college education (which can quickly dampen the excitement of getting accepted).

There are a few different options when it comes to financing a college education, and it’s important to understand the pros and cons of each. Then, you’ll likely be better able to develop a funding strategy that fits your unique situation.

Depending on your academic qualifications, you may have been awarded scholarships or grants, which is funding that won’t (typically) need to be repaid. Any expenses not covered by a scholarship will need to be financed, often through a combination of work-study, personal funds, or student loans.

It is fairly common for college students to take out student loans to finance their education. There are two main types of student loans: private student loans and federal ones. 

We’ll compare and contrast some of the more popular features of both private and federal student loans and explore some features that can help you determine what makes the most sense for your financial situation.

Related: A guide to private student loans

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Federal student loans are funded by the federal government and, in order to qualify, you must fill out the Free Application for Federal Student Aid (FAFSA) every year that you want to receive federal student loans. We’ll delve more into FAFSA soon — but first, here are some important distinct

ions to consider.

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Federal loans can be subsidized or unsubsidized. If you’re an undergraduate student and you have a certain level of financial need, you may qualify for a subsidized loan. The amount of money you qualify for will be determined by your school. They’ll also determine how much money you should receive in subsidized loans, if any.

If you are granted a subsidized loan, the U.S. government will cover, or subsidize, the cost of accrued interest on the loan  while you are a full- or half-time student. 

Your interest payments are also covered with subsidized loans during the six-month grace period after graduation as well as during any periods of loan deferment.

If you receive unsubsidized federal loans, you will not need to demonstrate financial need when applying and, as with subsidized loans, your school will determine the amount you can receive, based on what it will cost you to attend.

But with unsubsidized loans, you are responsible for the principal amount of the loan as well as any interest that accrues throughout the life of the loan.

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Direct PLUS Loans are another source of federal student loan funding. To qualify for graduate PLUS Loans, you need to be a graduate-level or professional student in a program that offers graduate or professional degrees or certifications and be attending college at least half-time.

Or parents can also apply for a parent PLUS loan  if they’re the parent of a dependent undergraduate student attending an eligible school at least half-time. “Parent” can be defined as biological or adoptive — or, under certain circumstances, you can be a step-parent.

To obtain a Direct PLUS loan, you cannot have an adverse credit history (you can learn more about that here). Plus, you (and, if applicable, your dependent child) must meet the general eligibility requirements for federal student aid.

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If you plan to apply for any of these types of federal loans, you’ll need to fill out the FAFSA form. Be aware of your state’s deadline — FAFSA funding is determined on a rolling basis, so the sooner you can apply, the sooner you may qualify.

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First off, you won’t be responsible for making student loan payments while you are actively enrolled in school. Your repayment will typically begin after you graduate, leave school, or are enrolled less than half-time. Interest rates on federal student loans made after July 1, 2006  are fixed and are typically lower than interest rates on private student loans.

And depending on the type of federal loans you have, the interest you pay could be tax deductible. Aside from Direct PLUS Loans,credit history doesn’t factor into a federal loan application. When it comes to federal student loan repayment, there are several options to choose from, including several income-driven repayment plans.

And if you run into difficulty repaying your federal student loans after graduation or when you drop below half-time enrollment, there are deferment and forbearance options available. 

These programs allow qualifying borrowers to temporarily pause payments on their loans should they run into financial issues, but interest may still accrue. The loan type will inform whether a borrower qualifies for deferment or forbearance.

Borrowers can contact their student loan servicer for more information on these programs.

Qualifying borrowers can also enroll in certain forgiveness programs, such as Public Service Loan Forgiveness (PSLF). These programs have strict requirements, so borrowers who are pursuing forgiveness should review program details closely.

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The CARES Act, passed in March 2020 in response to COVID-19, includes provisions to help borrowers with federal student loan repayment. The bill temporarily pauses payments on most federal student loans, without interest, through the end of September 2021.

Additionally, the CARES Act suspends involuntary collections and negative credit reporting during the same time period.

While required payments are paused, borrowers are still able to make payments on their loans if they so choose. 100% of payments made during this time will be applied to the principal balance of the loan.

Borrowers enrolled in forgiveness programs will not be impacted by the nonpayment of their loans during this time. The Education Department will consider this time period as if the borrower had continued making payments.

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Private student loans are not funded by the government. To apply for them, you can check with individual lenders (banks, credit unions, and the like), with the college or university you’ll be attending, or state loan agencies.

Because these loans are available from multiple sources, and each will come with its own terms and conditions. So, when applying for private student loans, it’s important to clearly understand annual percentage rates (APRs) and repayment terms before signing as well as the differences between private vs federal student loans.

Since private student loans are not associated with the federal government, their repayment terms and benefits vary from lender to lender. Some private loans require payments while you’re still attending college. 

Unlike federal loans, interest rates could be fixed or variable. If you are applying for a variable-rate loan, it’s a good idea to check to see how often the interest rate can change, plus how much it can change each time, and what the maximum interest rate can be.

When applying for a private loan, the lender typically reviews your financial history and credit score, which means it may be beneficial to have a cosigner.

Again, be sure to ask your lender about repayment options in addition to any deferment or forbearance options.

These will all vary by lender, so it’s important to understand the terms of the particular loan you are applying for.

Private loans can help fill the monetary gap between what you’re able to cover with grants, scholarships, federal loans and the like, and what you owe to attend college. It’s never a bad idea to take the time to do your research, shop around, and find the best loan options for your personal financial situation.

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To find out if the student loan you have is a federal student loan, one option is to check the National Student Loan Data System (NSLDS). 

This database, run by the Department of Education, is a collection of information on student loans, aggregating data from information about student loans, aggregating data from universities, federal loan programs and more.

Borrowers with federal student loans can also log into My Federal Student Aid  to find information about their student loan including the federal loan servicer.

Private student loans are administered by private companies. To confirm information on a private student loan, one option is to look at your loan statements and contact your loan servicer.

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After graduation, depending on one’s student loan situation, borrowers may wish to consider consolidation or refinancing options to combine their various loans into a single loan.

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The federal government offers the Direct Consolidation Loan program that allows borrowers to combine all of their federal loans into one consolidated loan.

Loans consolidated in this program receive a new interest rate that is the weighted average of the interest rates of all loans being consolidated — rounded up to the nearest one-eighth of a percent. 

This means that the actual interest rate isn’t necessarily reduced when consolidated. If monthly payments are reduced, it is most likely because the repayment term has been lengthened. 

Additionally, only federal student loans are eligible for consolidation in the Direct Consolidation Loan program.

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Borrowers with private student loans might consider refinancing their loans. Essentially, refinancing is taking out a new loan. Depending upon individual financial situations, applicants could qualify for a lower interest rate through refinancing.

When an individual applies to refinance with a private lender, there is typically a credit check of some kind. Each lender reviews specific borrower criteria, which varies from lender to lender, which influences the rate and terms an applicant may qualify for.

But what if you have both federal and private loans? If you combine your federal loans through the Direct Consolidation Loan program and refinanced your private loans, you’d still have two payments.

Learn more:

This article
originally appeared on 
SoFi.com and was
syndicated by
MediaFeed.org.


IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE  FOR MORE INFORMATION.
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