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The year 2023 brought a whirlwind of changes, especially for those dealing with student debt, as Biden's ambitious plan for widespread debt relief faced setbacks a few months ago.
According to a Forbes contributor, the year had its share of ups and downs. However, various other initiatives were set in motion. As a result, In 2023, some fortunate qualifying students received the life-changing news of their loans being forgiven, while others found themselves receiving bills in October that they were now obligated to pay.
Certain highlights that 2023 left were
- Biden brings the total number of borrowers getting their loans forgiven to 3.6 million
- The Launch of the SAVE Plan
- ‘Plan B’ to move forward
- Supreme Court voted to block Biden’s decision
Regardless, the year was marked by significant developments in student loan news, and 2024 is poised to bring more transformative changes for borrowers who have recently witnessed substantial transformations in the federal loan repayment landscape.
Student Loan Forgiveness Consolidation Deadline Extended
Last year, the Education Department approved over 855,000 borrowers for student loan forgiveness under the temporary Income-Driven Repayment Account Adjustment, part of a Biden program.
Ongoing through the summer, this initiative, provides retroactive credit for repayment terms under IDR and Public Service Loan Forgiveness. Although many will automatically receive benefits, some borrowers, especially those with FFEL-program loans or varied repayment histories, may need to consolidate through the Direct loan program.
This was originally set for December 31, but fortunately, the Direct loan consolidation deadline was extended by the Biden administration to April 30, 2024, granting additional time for borrowers to pursue forgiveness credits.
SAVE Plan Payments reduced to Half
Introduced by the Biden administration in August 2023, the Saving for a Valuable Education (SAVE) plan is a significant overhaul to the student loan system, replacing the Revised Pay As You Earn (REPAYE) plan.
However, REPAYE borrowers are automatically transitioned to the SAVE Plan, while others can switch on the Federal Student Aid website or through their loan service provider.
It’s some of the key features include a 50% reduction in required payments for undergraduate loans under SAVE, a new discretionary income formula based on 225% of the federal poverty level, and the prevention of interest capitalization for unpaid amounts, offering more generous terms to borrowers.
The ‘Plan B’ for Student Loan Forgiveness
In June 2023, the Supreme Court rejected Biden's attempt to forgive up to $20,000 in student loan debt per borrower, deeming it an overreach of his authority.
But, Undeterred, Biden's alternative "Plan B" for student loan forgiveness is progressing, with the Department of Education engaged in a "negotiated rulemaking" process aiming to forgive loan debt for certain followers. A committee, including students, college presidents, and other stakeholders, is determining the details of eligibility and forgiveness amounts, with proposals including forgiveness for those who've paid loans for 20 years or whose balances have grown.
However, legal challenges are anticipated, according to Betsy Mayotte, president of the Institute of Student Loan Advisors.
A Key Issue for the 2024 Election Battle
Further, It is also highlighted that Student loan forgiveness may become a key issue in the 2024 election, pitting Biden against a likely opponent, former President Donald Trump. While Biden supports widespread forgiveness, Trump, celebrating its rejection by the Supreme Court, deemed it "very unfair" to non-college-goers.
Three of Trump's appointed judges, part of the court's conservative majority, voted against Biden's forgiveness plan. Other aspects of Biden's student loan reforms, like the SAVE plan, faced political division, as evidenced by a failed Senate resolution in October.
Despite lacking sufficient support for a Biden veto override, the vote indicated Republican opposition to student loan forgiveness, with every GOP Senator and Democrat Joe Manchin voting against the SAVE plan.
Employer student loan payment matching
In 2024, your employer might introduce a valuable new benefit that aids in both managing student debt and saving for retirement.
Juggling student debt and retirement savings is a common challenge across age groups. According to a CNBC and Acorns study, 81% of individuals with student loans have had to postpone significant life milestones, such as buying a home or planning for retirement.
To remedy this, A supportive measure, came into form in 2023 to boost your retirement funds—your employer can match your 401(k) contributions while you make student loan payments.
As a provision under 2022’s Secure 2.0 Act, employers will be allowed to match employees’ student loan payments with a contribution to their workplace retirement account. Eligible accounts include 401(k), 403(b), 457(b), and SIMPLE IRAs.
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