4 Student Loan Changes For 2015 You Should Know About

For many of us, a new year can mean new changes in our lives. Many will be starting or returning to school, while others will graduate or continue to pay off their student loans.

Just as your life changes, so do the rules related to student loans. In 2015, we’re expecting some big student loan changes that could both positively and negatively impact how student loans affect your life.

No matter what stage you’re at with student loans, read on to learn out about student loan changes for 2015.

1. Cuts to the Public Service Loan Forgiveness program

One big news story from 2014 in the student loan world was President Obama’s proposed limits on the Public Service Student Loan Forgiveness (PSLF) program.

Enacted in 2007, PSLF has promised to pay off large chunks of student loan debt for qualified borrowers. PSLF requires 120 on-time payments, which take at least 10 years to make. After this period, students who qualify by working in governmental or nonprofit organizations can have their remaining federal student loan balances forgiven.

Since it’s been less than 10 years since this program started, no one has actually benefited from the program yet. But thousands of students are prepared and excited to cancel out their student loans starting in 2017.

However, the part about unlimited forgiveness may soon change. As part of the 2015 budget, President Obama proposed a limit on PSLF: $57,500 per student.

While many have freaked out over this proposed change, others say that there may be little to worry about for those currently slated to have large balances forgiven by PSLF. Though a clear ruling has not yet been made, some suspect that those who already have loans will be grandfathered into the old rules. There’s one reason for this: the promissory notes for the loans included details concerning PSLF.

However, anyone taking out new loans would become subject to the new limits.

If you’re looking forward to have debt forgiven on another repayment plan such as Pay As You Earn, then these changes shouldn’t affect you either.

2. More students will become eligible for Pay As You Earn

Among good news, those with older federal student loans may be in luck. Thanks to an order by President Obama, about 5 million more borrowers are expected to become eligible for Pay As You Earn (PAYE) in 2015.

PAYE won’t change at core, since this repayment option will still cap payments at 10% of a borrower’s income. Plus, any remaining debt will be forgiven after 20 years. However, at present, only borrowers who took out loans after October 2007 are eligible to use PAYE. The forthcoming change will allow anyone who meets guidelines for PAYE to take advantage of the program, too.

This change is currently set to take effect in December 2015, so you’ll have to be patient for a little while longer until the change is launched.

3. Decreased federal student loan interest rates

As you may have heard, federal student loan interest rates are no longer fixed rates set by Congress as they were in years past. They’re now tied to the US Treasury 10-year note, meaning that when Treasury note rates fluctuate, so do federal student loan rates.

New rates went into effect on July 1, 2015, and they actually went down a bit from last year. Rates on undergraduate loans decreased to 4.29%, down from the 2014–2015 rate of 4.66%.

If you’re taking graduate student loans, rates went down as well. Rates decreased to 5.84% for the 2015–2016 school year. That’s down from last year’s 6.21%. This new rate continues to be lower than the 6.8% rate from 2006–2013.

However, this downward trend is not expected to continue in years to come. By 2017, rates could exceed 6.8% for undergraduate loans. But again, we won’t know until new rates are announced next year.

4. Changes to FAFSA

Though major changes aren’t expected for FAFSA in 2015, a few minor ones are worth noting.

Fastweb reports a few small changes to the FAFSA application process.

This year, a new log-in process aimed at increasing the security of personal information will take effect. Students will now log in with a new Federal Student Aid ID instead of with personal information such as Social Security numbers, names, and dates of birth.

How parents affect the process is changing, too. A parent is now defined by the state. For example, widowed stepparents aren’t considered to be parents of the FAFSA applicant unless they have adopted the applicant.

The definition of “separated parents” will change, too. Spouses legally separated and living in separate households are considered to be “divorced or separated” for FAFSA. Those parents living in the same household are considered to be “married or remarried.” In both cases, the correct designation will be indicated on the FAFSA and could impact the applicant’s eligibility for student aid.

There are a few changes related to Pacific Islander applicants and applicants in foster care.

If any of these changes apply to you, then you may need to update your FAFSA entries from last year.

Wildcard: Federal student loan refinancing

We’re still waiting to see whether any federal student loan refinancing bills are passed by Congress in 2015. Last year, Sen. Elizabeth Warren proposed one that did not pass.

This bill—the Bank On Students Emergency Loan Refinancing Act—would have offered refinancing of all federal and private student loans to the current rates for first-time borrowers. However, the act died in the Senate twice last year, and its future remains uncertain.

As always, be on the lookout and stay tuned to the Student Loan Hero Blog for updates. You can subscribe below to get all of the latest updates on student loan changes that could affect you.

(note: this post was updated 7/22/2015 to reflect actual 2015–2016 Federal Direct Student Loan rates)

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Published in Federal Student Loan Refinancing, Federal Student Loans, Financial Tips, News, Pay As You Earn (PAYE), Pay Off Student Loans, Private Student Loans, Public Service Loan Forgiveness, Student Loan Repayment

  • A lot of people are waiting to hear about the refinancing options available.

  • trannyoakley

    Once the student debt bubble bursts–and it WILL burst, believe me–the federal government will have no choice but to forgive a large swath of total student debt.

  • Komrad

    If only we were banks that were too big to fail. Our bailout would be guaranteed!

  • andrew

    To point 3. “Increases in Federal Student Loan Rates”: Does that apply to loans already in repayment too? Meaning, ALL federal student loan rates are now variable? Or does that change only apply to new loans going forward?

    • Hi Andrew,

      These changes only apply to new loans taken out for the 2015-2016 school year. They do not impact rates on Direct Loans already in repayment.

      Also, I’ve updated the post to reflect the actual rates 2015-2016. They ended up decreasing, as you can now see.

      Thanks for your question and for pointing this out!

  • Elsie B.

    I’m a 68 year old parent who has been paying on a Parent Plus loan originally from Sallie Mae which is now Navient. I got 2 separate year long deferrement twice and the interest has increased. There is still over 30 thousand owed – way more than the original amount. Recently, I have been paying about $75. or more than billed. At the rate this is going, however I can’t see this ever getting paid off. I’m even considering bankruptcy on this one thing, My daughter even though she is working, says she cannot pay it now because is paying off another loan she got to attend a junior college from which she has graduated

    • Hi Elsie,

      Sorry to hear you’re in a tough spot with the loans. Unfortunately when you defer payments on unsubsidized loans, the interest continues to accrue. This can leave you owing a lot more than originally borrowed.

      Have you looked into consolidating your loan into a Direct Loan and using Income-Contingent repayment to limit your monthly payments? This may be an option to help ease the burden somewhat.

      Let us know if there’s anything else we can do to help.

      Best,

      Jeffrey
      Student Loan Hero

  • Eliza

    I took out graduate student loans beginning in 2012. I am about to graduate and considering consolidating my loans for the ease of one payment (they are all federal loans). However I am concerned that consolidating loans means a new promissory note – does that mean I would be subject to the PSLF cap if my new note was in 2016 although my original note would most likely get me “grandfathered in” to the old rules (with no cap)? Or does consolidating my loans still allow me to keep my original loan terms??? Thank you so much, I have not been able to find an answer to this anywhere.

    • Hi Eliza,

      Based on my understanding from everything I’ve read/heard about the issue, the proposal allows all borrowers who had their first loans dispersed before the date when the change would be made would be grandfathered in to the old rules.

      Note that this change to PSLF is just a proposal at this point, and the final terms have not yet been agreed upon. But from everything I’ve heard (which included an update from an student loan expert at a conference just this past weekend), borrowers would be grandfathered in.

      Please stay tuned for when these proposals are finalized, and we’ll be able to have a definitive answer on this blog.

      Hope this helps.

      Cheers,

      Jeffrey