Federal student loan borrowers have faced a seemingly never-ending barrage of changes with their loans over the past few years. Now that payments are back, it’s tempting to tune out and assume everything is business as usual.
But doing so would be costly: There are several key deadlines, benefit programs and potential issues that borrowers need to keep in mind in 2024, says Betsy Mayotte, the president of The Institute of Student Loan Advisors.
Money spoke with Mayotte to determine the biggest student loan developments that are likely coming in 2024 — and what you can do to prepare for them. If you are among the 40 million borrowers with federal student debt, here are the key dates and action items you should add to your 2024 checklist.
1. New employer retirement benefits for student loan borrowers
Date: after Dec. 31, 2023
What’s happening: Thanks to the SECURE Act 2.0, a sprawling retirement-savings reform package that passed at the end of 2022, employers can offer new benefits to workers with student loans and retirement plans.
Already, employers can “match” worker contributions into retirement accounts like 401(k)s or 403(b)s. For instance, if you defer 3% of your paycheck to go into your retirement account, your employer can also contribute the equivalent of 3% of your paycheck on top. (Standard financial advice is to always contribute at least enough to get this match, or you’re leaving money on the table.)
Under the SECURE Act. 2.0, employers can now “match” on-time student loan payments by contributing an equivalent amount into a retirement account on the employee’s behalf. The same goes for student loan payments for spouses or dependents of the worker.
In other words, with this new benefit, saving for retirement and paying down student debt no longer has to be an either/or choice.
What you can do now: Mayotte recommends reaching out to your human resources department to see how or if it is implementing the new benefits. Even if your company doesn’t plan to, asking about the benefit can at least get the conversation going and show demand for the perk.
2. Expanded SAVE repayment benefits
Date: July 2024
What’s happening: Additional student-loan repayment benefits are rolling out this summer in connection with the Biden administration’s recent SAVE income-driven repayment (IDR) plan.
President Joe Biden unveiled SAVE last summer after the Supreme Court struck down his broad-based plan for student loan forgiveness, touting it as the most affordable IDR plan ever offered by the government. Federal student loan borrowers who sign up can have their monthly bills pegged to 10% of their discretionary income — now defined as income above 225% of the federal poverty line. That means single borrowers who earn less than $32,800 per year or those in a family of four making less than $67,000 have a $0 payment. So far, about 3 million borrowers have qualified for $0 monthly payments.
On-time payments, even if they are $0, are counted toward eventual student loan forgiveness. With IDR plans, once a certain number of years of on-time payments are made, any remaining student loan balance is forgiven.
In July, several more SAVE benefits will go into effect:
- More affordable undergraduate loan payments: For undergrad loans, monthly student loan payments will be recalculated based on 5% of your discretionary income — down from the current 10% — making payments even cheaper.
- Possible loan forgiveness in as few as 10 years: If you originally borrowed $12,000 or less, you can get your remaining balance forgiven after 10 years of on-time payments, down from the 20- to 25-year range of other IDR plans. For every additional $1,000 you originally borrowed, your forgiveness timeline extends by one year ($13,000 would take 11 years, $14,000 would take 12 years, and so on up to a cap of 20 years for undergraduate loans and 25 years for graduate loans).
- Consolidating loans won’t hurt your progress toward forgiveness: After July, you won’t have to worry about loan consolidation wiping out your student loan payment history. This is especially helpful if you are expecting to have your loans forgiven through the SAVE plan. If you consolidate different loans with different payment histories, your new consolidated loan will have a payment history that is a weighted average of your old loans.
- Payment credit toward forgiveness during deferment or forbearance: For IDR-forgiveness purposes, loans that were in deferment before July 1, 2024, can receive on-time payment credit. And after July 1, 2024, you will be able to receive payment credit for loans during a forbearance period. For other periods of deferment or forbearance that you didn’t get credit for, you can make retroactive “buyback” payments to receive credit.
- Automatic IDR enrollment after missed payment: The Department of Education now has the ability to pull your financial information directly from the IRS, if you allow it. This can make signing up for plans much easier. If you’ve given permission, it can automatically enroll you in the most affordable IDR option available to you if you fall 75 days behind or more on your monthly payments.
What you can do now: If you’d like to take advantage of these benefits ASAP, you should sign up for SAVE before July. However, “SAVE isn’t for everyone,” Mayotte warns. If you have a high income, for example, your payments may actually rise, she says. To find out which repayment plan is best for your situation, use this repayment calculator by the Education Department.
3. End of the student loan payment on-ramp
Date: Sept. 30, 2024
What’s happening: Next fall, the Biden administration’s “on-ramp” period to help borrowers transition back into making payments post-pandemic will end. Missing student loan payments after that date will be far more consequential.
For now, during the on-ramp, the Education Department is not reporting missed or late payments to the credit bureaus, nor is it officially placing loans into default or delinquency status. Additionally, the department has said it isn’t referring borrowers to collections during this period. Combined, these leniency measures help shield borrowers’ credit scores and reports from getting damaged by missed payments.
Still, student loans are accruing interest in the meantime, and borrowers who have put their student loans on the back burner during the on-ramp will need to pay back any accrued interest before payments go toward the principal balance.
Outside the on-ramp period, delinquent loans are reported to credit bureaus after 90 days. After 270 days of missed payments, the loan goes into default.
What you can do now: Start making student loan payments if you can afford to so that you’re accustomed to regularly making them on time by the end of on-ramp next fall — and also to keep your accruing interest in check. If you suspect your credit has been incorrectly affected by missed payments during the on-ramp, pull your credit report to investigate (which you can now do for free, every week) and alert the Education Department’s student loan ombudsman.
4. Biden’s new student loan forgiveness program (maybe)
Date: possibly November 2024
What’s happening: After the U.S. Supreme Court struck down Biden’s marquee student loan forgiveness plan, the president vowed to find another pathway to forgive large amounts of student debt.
The Biden administration has been creating a framework for a new forgiveness program through a formal process called negotiated rulemaking, aka “neg reg.” The final public neg reg session ended on Dec. 12, and we’re now getting a better sense of who might qualify for forgiveness — and for how much — under a new plan in 2024.
The forgiveness proposal is expected to be far more tailored than Biden’s first, failed plan, which intended to forgive up to $20,000 per borrower. Analysts who watched the neg reg sessions closely are speculating that the new plan is intended to help borrowers who, due to runaway interest, have student loan balances higher than what they initially borrowed as well as folks who haven’t been able to pay off their loans after 25 years or so.
The crucial question is: When will the program roll out?
“Normally in a neg-reg scenario, we would expect the draft rules in June or July, and the final rules to come out around Nov. 1,” Mayotte says, but because of the presidential elections scheduled for that same month, “we strongly suspect they’re going to try to accelerate this.”
When forgiveness would actually start happening is also up in the air because, like Biden’s previous forgiveness plan, the new one is expected to face legal challenges.
What you can do now: The best thing to do for your financial well-being is to prepare for the worst-case scenario: that the new student loan forgiveness program won’t pan out. Try to keep chipping away at your student loans as best as you can, and utilize the tools that are already available to you, such as the new SAVE plan or other IDRs, the on-ramp, the Fresh Start program or the other student loan forgiveness plans.
This article was written by Adam Hardy from Money and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to [email protected].
