It’s a new year and a brand new start for many of us, full of financial goals and resolutions. It also means new rules, policies, and changes surrounding student loans.
In fact, 2016 stands to bring some big changes for student loan borrowers. If you are working on paying off student loans, learn the six big changes happening for student loans in 2016 that you need to know about.
1. New Way to ‘REPAYE’ Student Debt
The much talked about Revised Pay As You Earn (REPAYE) program became available on December 17, 2015. Federal student loan borrowers in need of a repayment plan with lower monthly payments now have another option to choose from.
One of the biggest improvements of REPAYE over the original Pay As You Earn program is that it allows an additional 5 million Direct Loan borrowers to obtain relief. That’s because under the new plan, borrowers can cap their monthly student loan payment at 10 percent of monthly discretionary income, rather than 15 percent, regardless of when the loans originated.
The REPAYE program will also forgive any remaining debt after 20 years for undergraduate loans. Graduate degree debt will be forgiven after 25 years.
While the new repayment option will afford more borrowers flexibility, there is a downside: Your spouse’s income will be considered when determining your monthly payment — even if you file your taxes separately.
2. Variable-Rate Loans Vulnerable to Fed Actions
After months of warning, the Federal Reserve finally raised interest rates, which has a direct impact on consumers with variable-rate loans. What does this mean for you? If you have private student loans or refinanced your loans at a variable rate, you might see an interest rate increase some time this year.
While the Fed rate hike was small, interest rates are expected to increase gradually over time. If you currently have variable-rate loans, you may want to focus on paying those down first or refinance to a fixed-rate loan.
Also, we’ll be on the lookout for any federal student loan interest rate changes this spring. Federal student loan rates, which are fixed, are determined each spring for new loans for the upcoming award year, which is from July 1 to June 30 of the following year.
3. Robocallers Can Call You on Your Cell Phone
You used to call me on my cell phone… Your cell phone is no longer reserved for emoji-laden texts or calls to the family. Congress recently gave debt collectors the right to use robocall technology to autodial federal student loan borrowers who haven’t made their payments.
Previously, it was illegal for debt collectors to call a cell phone, unless borrowers granted permission. To avoid this awkward and annoying situation, be sure to make on-time payments and avoid default.
4. Loan Servicer Changes
As part of a new bill, Congress will be making some changes in the loan servicer arena. The Department of Education recently received additional funding; as part of the deal, lawmakers are changing the current process to no longer give preference to four student loan servicers: Nelnet, Great Lakes, Navient, and American Education Services.
According to a report on the matter in the Washington Post, “Instead, the department would have to allocate new loans based solely on the quality of a servicers’ work and ability to keep borrowers current. That could shift a significant share of business to nonprofit companies, like the Missouri Higher Education Loan Authority and Oklahoma Student Loan Authority.”
This is a huge win for nonprofit loan servicers and borrowers alike, ensuring borrowers are paired up with high-quality loan servicers.
5. New President, New Policies
2016 is slated to be a big year for politics. In November, the American people will vote for the next U.S. president.
The election — regardless of your personal political preferences — will have a major impact on student loan legislation and policy. Nearly all the 2016 candidates have a plan to deal with student loan debt.
Sure, these changes won’t take effect in 2016, but the candidate that the American people elect this year will have ramifications for student loan borrowers in the future.
6. Perkins Loans Back from the Dead
The federal Perkins Loans program expired in fall of 2015, but was recently renewed with tougher eligibility requirements.
According to Inside Higher Ed, “The legislation would require borrowers to exhaust their eligibility for federal direct loans — both subsidized and unsubsidized — before receiving a Perkins Loan. Existing borrowers would not be subject to such a requirement.”
Though the bill is being revived, it’s currently being positioned as a calculated shutdown of the program. Perkins Loans are reserved for students in need, so the extension provides some hope, but with restrictions and still no long-term solution.
As these developments and new policies take shape in 2016, Student Loan Hero will keep you updated so you can stay on top of payments and get rid of debt as quickly as possible.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|