The start of 2024 ushered in a lot of changes (and chaos) for student loan borrowers, with both the release of the redesigned FAFSA and President Biden’s announcement that he is canceling even more student loan debt. But hold onto your hats, borrowers, because that’s not the only student loan-related change slated for this year.
Some of the changes will be positive, like millions of borrowers seeing slashed monthly payments under the new SAVE plan and the introduction of new employer retirement benefits for borrowers. Other changes will likely be less favorable, like the expiration of the payment on-ramp that had offered some buffer against the consequences of missed payments.
Millions will see their monthly payments cut in half under the SAVE plan
The Saving for a Valuable Education (SAVE) plan was introduced in 2023 as an updated income-driven repayment plan option, and will become even more beneficial to many borrowers this year.
For starters, as of February, “borrowers who originally took out $12,000 or less for undergraduate or graduate study can get their loans forgiven after 10 years on SAVE, rather than 20 or 25 years,” said Nerdwallet. While borrowers enrolled in the SAVE program who have made payments for at least 10 years are eligible for this debt cancellation, those who took out more than $12,000 will have to make payments for an additional year for every additional $1,000 borrowed before they’re eligible for relief, said the Biden administration in a press release.
Coming down the road in July, borrowers also “won’t have to worry about loan consolidation wiping out” their payment history, and they “will be able to receive payment credit for loans during a forbearance period,” said Money. Additionally, starting in July, “borrowers enrolled in SAVE will have their required payments for undergraduate loans cut in half, to 5% of their disposable income from 10%, with graduate school loans remaining at 10%,” said Investopedia.
Student loan borrowers will be able to enjoy new employer retirement plan benefits
If you didn’t already catch wind of this new perk, it’s worth noting because of its potential to turbocharge your retirement saving efforts. Starting at the beginning of 2024, “thanks to a SECURE Act 2.0 provision that just went into effect, employers can ‘match’ an employee’s student loan payment by contributing the same amount to a workplace retirement account,” said Nerdwallet. In other words, if you make a $100 payment toward your student loans, your employer could in turn choose to contribute $100 toward your 401(k) plan.
Even better, said Money, is the fact that this perk also “goes for student loan payments for spouses or dependents of the worker.”
Consequences for missed, late or partial payments will resume
As forewarned, amidst all of these newly unveiled perks for student loan borrowers is one piece of less welcome news: Starting in October, “the Biden administration’s ‘on-ramp’ period to help borrowers transition back into making payments post-pandemic will end,” said Money. While it’s lasted, this on-ramp has meant the Department of Education has not reported missed or late payments to the credit bureaus, or placed loans in default or delinquency, which has effectively protected borrowers’ credit.
So what exactly does the end of the on-ramp mean for student loan borrowers? After this buffer disappears, said Nerdwallet, “late, partial or missed payments can lead to severe consequences, like loan default, debt collection and garnished paychecks.” Plus, “borrowers who have put their student loans on the back burner during the on-ramp will need to pay back any accrued interest before payments go toward the principal balance,” said Money.
The Biden administration could unveil “Plan B” for student loan forgiveness
The announcement of this predicted student loan change is still up in the air, but it’s anticipated to happen right around election time, which means November 2024. This plan would constitute the Biden administration’s second attempt to secure student loan forgiveness, after its first plan was struck down by the Supreme Court.
Already, the Biden administration has “pursued a more piecemeal approach, tweaking existing programs long plagued by bureaucratic delays” and canceling student loan debt, said The New York Times. In February, for example, Biden canceled another “$1.2 billion in student loan debt, bringing the total amount that he has wiped out during his time in office to $138 billion for 3.9 million borrowers.”
As for the new plan, the details have yet to be finalized, but “the department has proposed forgiveness for people who have paid on their loans for 20 years, people whose loan balances have grown over time, and several other categories of borrowers,” said Investopedia. Of course, there’s still the chance of legal challenges springing up again — so even if the announcement does happen as predicted, that does not necessarily mean the plan will take effect this year.