Student loans will change in a big way 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 forgiveness, expect major changes for student loans. Here are 5 big changes to watch for in 2022:
1. Student loans will be paused for four months
For the first four months of 2022, federal student loan payments will be paused. This means that you won’t be required to make federal student loan payments until May 1, 2022. (Student loans are paused, but here’s 6 things to do now). With 0% interest rates, there also won’t be any new interest accrual on your federal student loans. Finally, if you have a student loan in default, you won’t face any collection or garnishment of wages or Social Security Checks. Importantly, this only applies to federal student loans, but you should continue to pay private student loans. That said, here’s why you should pay student loans even when they’re paused.
2. Student loans may get canceled
Student loans may get canceled in 2022. It’s a dream of progressives in Congress and student loan advocates everywhere. While there is no guarantee, President Joe Biden could cancel more student loans on a targeted basis. (Student loan borrowers will now get $15 billion of student loan cancellation). To date, Biden has canceled $12.7 billion of student loans since becoming president. While lower likelihood, Biden may enact wide-scale student loan cancellation of up $10,000 if Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) get their way. (Here’s a list of everyone who wants Biden to extend student loan relief). It’s also possible, although less likely, that Congress passes bipartisan legislation that provides additional student loan relief, which could include some student loan forgiveness. One thing is clear: don’t expect all your student loans to get canceled. It’s also possible that student loan forgiveness could be the reason that Democrats lose the midterm elections.
3. Student loan payments will be easier
In 2022, student loan payments will be easier. Biden and the US Department of Education are focused on making student loan payments simpler and less bureaucratic for student loan borrowers. To help student loan borrowers, Biden has 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 enroll in income-driven repayment plans such as IBR, PAYE, REPAYE and ICR. Biden also wants to provide 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-driven repayment plans so that your monthly student loan payment would be only 5% of discretionary income (rather than the current 10-20% of income).
4. Student loans will become more expensive
Expect student loans to become more expensive in 2022. (What higher interest rates mean for your student loans). Why? Interest rates are expected to rise this year. The Federal Reserve announced its intention to increase interest rates, and it could happen several times in 2022. This means that student loans could have higher interest rates too. Most current federal student loans won’t be impacted as they have fixed interest rates that won’t 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 also can change if 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 to historically low rates
Student loans can be refinanced now at historically low rates. That’s good news for student loan borrowers who want a lower interest rate, lower monthly payment or both. Rates start as low as 1.74%.
This student loan refinancing 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 5 to 20 year student loan repayment term. You can refinance private or federal student loans, or both. If you think you’ll need federal benefits like forbearance, deferment, income-driven repayment or public service loan, 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 student loans faster, then 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:
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