The Supreme Court has struck down Biden’s forgiveness plan – but that’s only a part of Biden’s student loan plan. Another important part is set to take effect in July: an overhaul of income-driven repayment plans.
Under the current system, borrowers who go into an income-based repayment plan regularly end up owing more money a decade later than they originally took out. Biden’s policy changes how interest is calculated in those plans and turns many undergraduate loans into, essentially, college grants. Thousands of borrowers will end up with a monthly payment of $0.
WSJ explains the big changes coming to repayments this summer—regardless of how the Supreme Court rules.
Illustration: Madeline Marshall
0:00 What has the Biden Administration done for student loan forgiveness?
1:16 How the typical student loan works
2:10 What are Income-Driven Repayment Plans and how do they work?
3:22 The shortcomings of IDR loans
4:28 How President Biden’s new loan plan could help fix past issues
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How Student Loans Are Changing, Regardless of the Supreme Court Ruling
Student loans have long been a contentious issue in the United States. From soaring tuition costs to the burden of debt on graduates, the topic has captured national attention. Recently, all eyes have been on a Supreme Court ruling, which could potentially impact how student loans are managed. However, even without this ruling, the landscape of student loans is already undergoing significant changes.
With or without any specific judgment from the Supreme Court, one cannot ignore the rapidly evolving dynamics of student loans. The War Street Journal (WSJ) sheds light on some key transformations that are reshaping this arena, affecting students, borrowers, and the wider economy.
Firstly, the pandemic has accelerated change in the student loan landscape. The outbreak of Covid-19 exposed the fragility of the system, as countless borrowers faced financial hardship. In response, the government implemented forbearance and interest-free payment relief, providing temporary respite for borrowers. This unprecedented move highlighted the need for a more resilient loan framework, prompting policymakers to consider alternative measures, such as loan forgiveness or restructuring.
Moreover, the rising cost of higher education has forced students and families to investigate alternative financing options. Many are exploring income-sharing agreements (ISAs). Unlike traditional loans, ISAs allow students to fund their education by pledging a percentage of their future income to investors for a defined period. Although ISAs are not a new concept, they are gaining traction as a more flexible and personalized approach to financing education. This innovative shift challenges the traditional student loan model and could potentially shape the future of educational funding.
Student loan refinancing is also emerging as a popular trend. As interest rates drop to historic lows, many borrowers are taking advantage of this opportunity to refinance their loans and save on long-term interest payments. Several private lenders have entered the market, offering competitive interest rates to attract borrowers looking to escape the burdensome terms of federal loans. This heightened competition is driving lenders to experiment with new repayment options and lower interest rates, ultimately benefiting borrowers seeking relief from their debt.
Additionally, employers are recognizing the role they can play in alleviating the student loan burden for their employees. Tuition reimbursement programs have become a common employee benefit, but some companies are taking it a step further by directly contributing to their employees’ student loan payments. This emerging trend not only reduces the financial stress on graduates but also serves as a recruitment and retention tool for employers looking to attract and retain top talent.
Finally, the increased focus on financial literacy and education is transforming the student loan landscape. Acknowledging the lack of awareness among students and families regarding loan terms and repayment options, many organizations are working to bridge this knowledge gap. Financial literacy courses, online resources, and counseling services are becoming more commonplace, equipping borrowers with the tools to navigate the complex world of student loans.
While the Supreme Court ruling may have implications for student loan management, it is important to recognize the broader changes that are already reshaping the industry. The impact of the pandemic, the rise of alternative financing models, refinancing opportunities, employer contributions, and improved financial literacy are just a few examples of the ongoing evolution in student loans. Regardless of the outcome of the legal battle, the future of student loans is being rewritten, and it is essential to stay informed about these changes that impact millions of Americans seeking higher education.
why not just give free college education? isn't education a right, or is that adage just lip service?
Never thought the journal would mispronounce a common financial term.
AMORTIZATION = A•MR•TAI•ZAY•SHN
1:43
Where is the message of, “Pay your bill. You owe it.”?
Ironically everyone going to university a) supports rising costs due to demand and b) devalues having a degree in the first place.
The plan sucks,Jim Crow Joe lies, he should have fought for forgiveness a promised during the election!
Imagine if the borrowers were anything resembling responsible adults. With a 3 1/2 year pause on payments imagine how much principal could have been paid down just making half payments instead of trips to Cabo and new cars and big screen TV’s.
They should just scrap interest on student loans.
So this is, once again, not loan forgiveness. It is charging the taxpayers instead of the borrowers. They've just changed a few words and who is eligible. Sorry, but no. I paid for my education, I paid for my child's education. I shouldn't have to pay for the education of people who took out loans that they can't or don't want to pay off. What needs to be changed is a fair discussion with these kids of exactly what they are agreeing to and cheaper ways to get their education….and seriously lowering tuition costs.
I have a question about an already charged off loan that someone magically got re-opened March 2023 and is now current. Is that legal? Because I it seems illegal and is now messing with my credit score.
Pay it back twice.Cancel the poor blanking students.
Because of cost of higher education and because I finished my degree later in life, I still owe approximately $40,000 in student loans. I wanted a BSN in nursing and now at 58ish years old, wonder if it was worth the principle and interest of that BSN.
I watch several YouTube videos on how to trade in the stock market but haven't made any head start because they are either talking some gibberish or sharing their story of how they made it and I do not want to make mistakes by taking risks in my own hands
biden doesn't have the authority to forgive student loans. That authority rests solely with Congress. He knew that, but it sounded good to the suckers that borrowed the money, that voted for him, thinking Uncle Joe will fix it for us. Even if the loans are forgiven, that money still has to be repaid. The ones that borrowed the money will face ever increasing taxes on food, cars, homes, gas and electric, EVERYTHING, and not just the borrowers, but EVERY citizen in this country will be saddled with this debt. That why the ones that borrowed the money should be made to pay back every dime of it. It's their debt, not mine or anyone else's debt. THEIR DEBT!!!
First the Obama phone…Biden Bucks….next up the Bernie House.
Insane that it would be cheaper to literally just hit a reset button on everyone's debt instead of making them pay it all lol. Wow.
College is a waste of time 90% of the time
tax payer will have to pay everything, another lawless president
So we all go broke faster as we pile on more national debt to pay for this. Typical democrat thinking. The interest alone on the debt is a trillion dollars. It will keep growing until the dollar collapses and we end up like Venezuela. But that's ok because Biden gets to buy votes with it so he can stay in power. He'll be dead by the time it all collapses so what does he care.
These income driven plans are a JOKE! Just 5% of discretionary funds??? That’s nothing! Why would anyone bother to pay back their loans if they qualify for this absurdly generous plan? As a taxpayer, this is disgusting.
meanwhile i am here in Saudi studying medicine for free God Bless Arabia
It should have been interest-free from the start. Like almost any other debt, debtors should be able to negotiate lump-sum payments or settlements, claim bankruptcy or refinance their debt at any time. Interest rates dropped to bearly 2% during Covid. I would have LOVED to be able to refinance my debt then, but couldn't. Finally, let students shop for schools based on value-to-cost and let schools compete on those grounds and defend their value.
Pay your loans.
Anything that can be changed by a pen can be changed by another pen. Imagine thinking you can take out 200k loan and only pay back 10k and get it all forgiven.
Do you see ? The root of why the democrats are in power is due to the Universities that spread their propaganda. Student loan for givenness is not about helping the students, it is about insuring that the Universities get their money, when the economy collapses and students are unable to pay, A transfer of the peoples money being diverted to these traitorous Universities.
So not fair!!
Another problem is that you are required to use your parents income as a basis for financial aid despite the fact that you might be 100% independent. This is until the age of 22. After that you can be considered independent.
What’s crazy is as of today the government is telling people to enroll in the income driven repayment plan so they can be eligible for forgiveness. No thank you!! I’m not moving off of my 10 year loan to have my balance start going up.
Why not just not subsidize colleges and not guarantee loans so the colleges take risk
Then the gov won’t spend anything and colleges will lower their tuition costs
where is the application
You should try being disabled for 10 year and still can't get the loans forgiven.
Yep continue with your unconstitutional bail out for party animals and drive this country deeper in debt, real smart move, NOT!
The government should forgive all interest at the very least and bar any company from charging interest for any student who successfully completes their degree.
Why couldn't Chris be Chris?
Hi, I’m Mary.
Imagine being outraged that your country's leader has taken executive action to protect people from predatory lending practices…lol
Tuitions are going up, just like housing prices are going up, because both are related to unearned money being dished out.
Anyone who thinks they should be paying the minimum possible monthly payment on a $30K loan is doing it wrong. And yes, I know cost of living is high. But you took on the responsibility of paying off these loans when you signed on the dotted line, so you can take on the responsibility to move in with a roommate to save on rent, buy your grocies at Aldi and Walmart, and work to maximize your earning potential. Call it "bootstrap" philosphy if you want, but thinking others should pay for your bad decisions as a young person via taxes is ridiculous.
Every time I watch a documentary of one of america’s systems. It feels like america looks like a flawed machine that malfunctions almost every time.
Let people file bankruptcy like any other debt.
This is a scam made buy banks and institutions "eron2"
Go with the 10-year standard repayment plan. All these other government programs/solutions that they keep recreating are made to keep you in their pocket for longer.
Interest rates on an educational loan should never have been #Congress #college
So claiming bankruptcy ain't an option ?
This video is misleading. Former President Obama or Bush pilot the program to veterans/military (I believe other professions as well). My father took advantage of that program.
If I'm not mistaken, President Biden has created an interest-free loan. Be more up front.
Institutional corruption …