Student loan changes are a’coming

The Biden administration announced changes to the federal student loan system yesterday affect almost every one of the more than 40 million Americans who hold federal student debt. All told, borrowers owe ~$1.6 trillion in student loans – an amount larger than credit-card or auto debt.

🔑📝 Key elements of the Education Department’s proposal include:

• Expanding a program that forgives debt completely for borrowers who commit to working for the government or a nonprofit for 10 years or more, and have already made 120 qualifying payments.
• Eliminating interest capitalization — aka adding unpaid interest to the principal of the loan so that it also accrues interest — almost entirely.
• Extending more generous standards for borrowers seeking debt relief on fraud claims, or those who are permanently disabled.

👀 Looking ahead… The proposed changes will be open for public comment for 30 days, after which the Education Department plans to finalize them so they can take effect by July 1, 2023.

🎓💰 Zoom out: The WSJ reported last month that Biden is expected to announce a final decision on student debt forgiveness sometime in July or August. But whether that’s true or not, the White House isn’t saying: ever since denying a WaPo article published in late May claiming that Biden had decided to cancel $10,000 in student debt for ~97% of lower-income borrowers, they’ve kept anything resembling federal student debt forgiveness out of their mouths.

+Dig deeper: To Forgive or Not to Forgive: The Student Loan Question