What To Expect With Your Student Loans In 2023

The student loan landscape has become a confusing mess throughout 2022. Many people with federal student loans are hardly aware of what’s happening now, and it’s easy to see why.

President Biden promised student loan forgiveness of $10,000 to $20,000 in federal loans per eligible borrower in August of 2022, but that position is now being held up in court. Payments on federal student loans, which had been put on hold since March of 2020, resumed in an almost shocking number of times, only to be stopped again at the last minute.

Here are new updates to know about PSLF, a new repayment plan that is (presumably) in the works, and other changes that could come into play in 2023. If you’re curious what exactly you can expect to happen to your federal student loans in 2023, here are some key updates you should be aware of.

sorry or not

First, you should know that Biden’s student loan forgiveness plan may or may not succeed in 2023, regardless of what student loan “experts” are saying on TikTok right now. It all depends on what the Supreme Court has to say after hearing the formal arguments in late February this year.

This ultimately means that eligible borrowers may not have up to $10,000 in federal student loan loan forgiveness (or $20,000 in loans for Pell Grant recipients) at all. Borrowers can still hope for the best at this point, but at least to some extent it looks like the whole plan will fizzle out.

When can we expect to hear a reply? Probably not until a few months after oral arguments are heard – so don’t expect an answer until closer to the summer.

Student loan repayment will likely restart in 2023

While student loan repayments may have been “kicked down the road” several times already, it is almost certain that borrowers with federal student loans will have to start making payments again in 2023. For now, the date for federal loan payments to be rolled back hinges again on the Supreme Court’s decision on President Biden’s student loan forgiveness plan. In fact, the US Department of Education says the following about it Website,

“The student loan payment moratorium is extended until the US Department of Education is permitted to implement the debt relief program or the litigation is resolved. Payment will resume after 60 days. If the loan Relief program not implemented and not litigated. Resolved by June 30, 2023 – payments will resume 60 days after that. We will notify borrowers before payments resume.”

Given that the Biden administration has also announced that the state of emergency is likely to expire in May, this means that future extensions of the pay freeze are unlikely. The only “if” is whether the administration will try to squeeze out one final extension before the Covid-19 emergency ends.

Borrower Protection for Repayment Modification

According to StudentEd.gov, borrower defense for repayment is a term used to describe the discharge of some or all of your federal student loan debt that may come into play “if your school delinquent you or others engaged in misconduct in violation of some state laws”

Starting from July 1, 2023, many changes will be applicable regarding this program United States Department of Education,

• Borrower protection for repayment can be automatically applied to groups of students
• Loans can be discharged through Borrower Defense for repayment under the Extended List of Claims
• Schools will no longer require students to “engage in pre-dispute mediation or sign a class action waiver”.
• The borrower’s defense to repayment claims shall be settled within a specific time, otherwise the loans become unenforceable.

If you believe you have been defrauded by your college – whether for-profit or non-profit – you should apply to borrower protection for repayment as soon as possible.

Borrowers get relief from interest capitalization

Interest capitalization occurs when borrowers are charged interest that is added to the principal of their loan balance, thus creating a situation where interest is compounded and the loan balance is likely to grow.

A new US Department of Education rule eliminates instances where interest is capitalized unless it is required by law.

“This means that interest will no longer be added to a borrower’s principal balance when a borrower first enters repayment, exits a forbearance, and leaves an income-driven repayment plan other than income-based repayment.” is,” notes StudentEd.gov.

They also specifically state that these rules apply to Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) plans.

New Income-Driven Repayment Plan

When President Biden announced his new student loan forgiveness plan, fact sheet The program mentions a new income-driven repayment plan aimed at helping qualified borrowers make smaller payments (or no payments) on their federal student loans. Specifically, it said the following:

“The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income — half of the rate that borrowers would now have to pay under most existing plans. That means the average annual student loan payment would drop by more than $1,000 for both current and future borrowers.”

The proposed changes are improvements to the REPAYE plan that allows borrowers with at least 10 years to qualify for loan forgiveness, and no more than 20 years for graduate loans. This could be a big win for borrowers, but the actual date of its implementation is still unknown.

The administration is working to make the program go live by the end of 2023, but realistically it may not happen till 2024.

Changes to PSLF in 2023

Some changes will also come in 2023 with the Public Service Loan Forgiveness (PSLF) program, which includes setting a standard for “full-time employment” of 30 hours per week.

Borrowers will also greatly aid their progress toward PSLF forgiveness, which includes certain periods spent in moratorium or forbearance to begin counting toward the 120-month payment threshold. You can read about all the upcoming changes to this program here PSLF Fact Sheet,

Bottom-line

Several other changes are being promised to federal student loans in 2023, including increased protections for students who become totally and permanently disabled and more loan forgiveness for those students. which have finally closed. This means that, if you have federal student loans, there are even more instances where you can have all or part of your loans forgiven this year.

You also have the ability to qualify for a lower student loan payment once payments resume.

If you have student loans, now is the time to get ready to resume payments, and to understand your options if you qualify for any of these new initiatives.