Student loans will change dramatically in 2022.
Here’s what you need to know – and what it means for your student loans.
2022 will be a big year for your student loans. From student loan relief to potential student loan cancellation, expect major changes for student loans. Here are 5 big changes to watch for in 2022:
1. Student loans will be suspended for four months
During the first four months of 2022, payments on federal student loans will be suspended. This means that you won’t be required to make federal student loan payments until May 1, 2022. (Student loans are on hold, but here are 6 things to do now). With 0% interest rates, there will also be no new interest accruing on your federal student loans. Finally, if you have a delinquent student loan, you will not face any collection or garnishment of wages or Social Security checks. It is important to note that this only applies to federal student loans, but you must continue to pay for private student loans. With that said, here’s why you should pay off student loans even when they’re on hiatus.
2. Student loans can be canceled
Student loans could be canceled in 2022. That’s the dream of congressional progressives and student loan advocates around the world. While there are no guarantees, President Joe Biden could cancel more student loans in a targeted fashion. (Student loan borrowers will now receive $ 15 billion in student loan cancellations.) To date, Biden has canceled $ 12.7 billion in student loans since becoming president. Although the probability is lower, Biden could write off a student loan of up to $ 10,000 on a large scale if Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA ) get what they want. (Here’s a list of everyone who wants Biden to extend student loan relief.) It’s also possible, though less likely, that Congress will pass bipartisan legislation that provides additional student loan relief, which could include student loan forgiveness. One thing is clear: don’t expect all your student loans to be canceled. It’s also possible that the student loan cancellation is the reason Democrats are losing the midterm election.
3. Student loan repayments will be easier
In 2022, student loan repayments will be easier. Biden and the US Department of Education are focused on simplifying and bureaucratizing student loan payments for student loan borrowers. To help student loan borrowers, Biden extended student loan relief three times and also advised student loan borrowers to do these 3 things. Among other changes, Biden wants to make it easier to sign up for income-based repayment plans like IBR, PAYE, REPAYE, and ICR. Biden also wants to give more time to recertify discretionary income and also wants to allow student loan borrowers to self-report income for direct loans. As a presidential candidate, Biden also proposed changing income-based repayment plans so that your monthly student loan payment is only 5% of discretionary income (instead of the current 10-20% of income). .
4. Student loans will get more expensive
Expect student loans to become more expensive in 2022. (What higher interest rates mean on your student loans). Why? Interest rates are expected to rise this year. The Federal Reserve has announced plans to raise interest rates, and this could happen multiple times in 2022. This means student loans could also have higher interest rates. Most current federal student loans will not be affected as they have fixed interest rates that will not change. However, some older federal student loans have variable interest rates, which can change if interest rates are increased. Private student loans with variable interest rates can also change if the rates are increased. Finally, if you plan to borrow a new federal student loan in 2022, it could have a higher interest rate if the Fed raises rates in early 2022.
5. Student loans can be refinanced at historically low rates
Student loans can now be refinanced at historically low rates. This is good news for student borrowers who want a lower interest rate, lower monthly payments, or both. Rates start as low as 1.74%.
This student loan refinance calculator shows you how much money you can save.
With student loan refinancing, you can choose a fixed or variable interest rate as well as a student loan repayment term of 5 to 20 years. You can refinance private or federal student loans, or both. If you think you need federal benefits like forbearance, deferral, income-tested repayment, or civil service loan cancellation, for example, you’ll want to keep your federal loans and only refinance private loans. . That said, if you’re more focused on saving money and paying off student loans faster, student loan refinancing can help you save up to thousands or tens of thousands of dollars depending on your student loan balance.
Here are some popular ways to save money and pay off student loans: