6 Student Loan Changes for 2016 You Need to Know About


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.

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