What’s in store for your student loans in 2019?
Here are five big changes that could impact your student loans this year.
1. Student Loan Forgiveness
If you’re hoping for student loan forgiveness, there’s no guarantee that student loan forgiveness will continue in its current form, or at all.
While student loan forgiveness may benefit borrowers, the federal government pays for student loan forgiveness. U.S. Secretary of Education Betsy DeVos has noted that federal taxpayers essentially are on the hook to pay for federal student loans that are forgiven.
Current participants in Public Service Loan Forgiveness (10 years to student loan forgiveness) or income-driven repayment programs (20 to 25 years for student loan forgiveness) may be expected to be safe for student loan forgiveness, but the future of student loan forgiveness may change.
What It Means For You: While student loan forgiveness may end, student loan forgiveness may not be worth it to student loan borrowers in the long run. You may be able to pay off student loans faster or refinance student loans to save money.
2. Student Loan Repayment
When it comes to student loan repayment, you have multiple options. From income-driven repayment to making extra student loan payments, there are several ways to save money.
In 2016, then-candidate Donald Trump proposed to combine the existing income-driven repayment plans – such as Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) – into a single plan to make it less confusing for borrowers.
Make sure you understand the difference between student loan consolidation and student loan refinance.
What It Means For You: Remember, income-driven repayment plans are only for your federal student loans. If you have private student loans – and most people do – you need a separate action plan to pay off your private student loans too.
3. Variable Rate Student Loan vs. Fixed Rate Student Loan
Yes, student loan rates are increasing.
Last year, the Federal Reserve raised interest rates four times. This year, the Fed may raise interest rates further. Each time that interest rates increase, you may pay more for your student loans if you have a variable interest rate student loan.
When you borrow or refinance your student loans, you have a choice between a fixed interest rate and a variable interest rate. In a rising interest rate environment, higher interest rates adversely affect consumer borrowers because your student loan interest rate will likely rise as well.
If you borrow a new student loan, you should consider a fixed interest rate student loan.
What It Means For You: If you currently have a variable interest rate student loan, you can refinance student loans and convert variable interest rate student loans to a fixed interest rate student loan.
4. Student Loan Lenders
Today, all federal student loans are originated by the federal government.
President Trump and Secretary DeVos want to increase the role of the private sector in origination of federal student loans. This means that private lenders such as banks and other financial services companies could issue federal student loans.
Trump believes that the federal government generates too much “profit” from issuing student loans, and wants private sector lenders to participate in federal student loan origination.
What It Means For You: There may be several benefits to student loan borrowers if private lenders compete with the federal government for federal student loan issuance. If such a plan is implemented, borrowers will look for lower student loan interest rates, better customer service and a more streamlined student loan application process.
5. New Student Loan Rates
New federal student loans reset every July 1.
Interest rates for federal student loans are determined by federal law. Interest rates reset every July 1 and run for one year until June 30. All federal student loans are fixed interest rates loans (although you can refinance student loans to receive a fixed interest rate).
What It Means For You: While these new student loan interest rates affect new borrowers, your variable rate student loans may reset monthly so pay attention to your interest rate.