Education Department Will Restrict Student Loan Forgiveness Credit Under New Repayment Plan |
The Education Department released final regulations governing student loan repayment last week. The new rules set the framework for how federal student loans can be repaid following the passage of historic legislation by congressional Republicans and President Donald Trump last year that will fundamentally reshape how borrowers repay their student loans. But buried in the new regulations is a significant change that may ultimately impose significant costs on borrowers by limiting their ability to receive credit toward student loan forgiveness when changing their repayment plan.
Trump administration officials celebrated the publication of the final rules, which are set to go into effect this July. Top officials have argued that the changes will provide borrowers with a simplified, more efficient, and fairer student loan repayment system.
“The Trump Administration is focused on putting students and taxpayers first, which is why we are implementing durable policies to make higher education more affordable,” said Under Secretary of Education Nicholas Kent in a statement last Thursday. “President Trump’s Working Families Tax Cuts Act addresses longstanding challenges in higher education and federal student lending, including exorbitant tuition costs, unchecked borrowing, and a confusing maze of repayment options that too often leave borrowers with higher balances despite making payments. This final rule will help ensure students can access higher education without racking up excessive loan debt, offer repayment options that better serve borrowers, and force institutions to reduce costs.”
But critics have long argued that the new changes to federal student loan repayment will lead to higher payments. And the latest change to the final version of the new regulations, which department officials buried in the dense regulatory text and did not publicly announce, may limit the ability for borrowers to receive student loan forgiveness credit under certain circumstances. Here’s a breakdown.
Income-Driven Repayment Leads To Student Loan Forgiveness
The changes that the Education Department is making to student loan repayment centers on income-driven repayment plans. IDR plans have been available for more than 30 years, and allow borrowers to........