Over the past few years, holders of federal student loans have experienced an almost constant stream of changes to their loans. It can be easy to become indifferent and believe that things are back to normal now that payments have resumed.
But it would be expensive to do so: In 2024, borrowers should be aware of a number of important dates, benefit plans, and potential problems, according to Betsy Mayotte, president of The Institute of Student Loan Advisors.
Money chatted with Mayotte to find out the major developments pertaining to student loans that are probably in store for 2024, as well as what you can do to get ready for them. In case you are one of the 40 million debtors who have federal student loan debt, make sure to include these important dates and actions to your 2024 checklist as compiled by Money.
1. New employer retirement benefits for student loan borrowers
Date: after Dec. 31, 2023
What’s happening: Employers now have the ability to provide new benefits to employees with student loans and retirement plans because of the SECURE Act 2.0, a comprehensive retirement-savings reform bill that was passed at the end of 2022.
Employers are already permitted to “match” employee contributions made to retirement plans like 403(b) or 401(k) accounts. For example, if you set aside 3% of your salary for your retirement account, your employer may match that amount up to a maximum of 3% of your compensation. (Generally speaking, if you don’t donate at least what is required to receive this match, you’re throwing money away.)
Employers can now “match” timely student loan payments made by their employees by making an equivalent contribution to their retirement account on their behalf under the SECURE Act, 2.0. The same holds true for the worker’s spouse or dependents’ school loan payments.
Stated differently, this new benefit eliminates the need for retirement savings and student debt repayment to be mutually exclusive.
What you can do now: Mayotte advises getting in touch with your HR division to find out if and how the new benefits are being implemented. Asking about the benefit can at least start a conversation and demonstrate desire for it, even if your organization has no plans to offer it.
2. Expanded SAVE repayment benefits
Date: July 2024
What’s happening: Additional student-loan repayment benefits are rolling out this summer in connection with the Biden administration’s recent SAVE income-driven repayment (IDR) plan.
President Joe Biden unveiled SAVE last summer after the Supreme Court struck down his broad-based plan for student loan forgiveness, touting it as the most affordable IDR plan ever offered by the government. Federal student loan borrowers who sign up can have their monthly bills pegged to 10% of their discretionary income — now defined as income above 225% of the federal poverty line. That means single borrowers who earn less than $32,800 per year or those in a family of four making less than $67,000 have a $0 payment. So far, about 3 million borrowers have qualified for $0 monthly payments.
On-time payments, even if they are $0, are counted toward eventual student loan forgiveness. With IDR plans, once a certain number of years of on-time payments are made, any remaining student loan balance is forgiven.
3. End of the student loan payment on-ramp
Date: Sept. 30, 2024
What’s happening: Next fall, the Biden administration’s “on-ramp” period to help borrowers transition back into making payments post-pandemic will end. Missing student loan payments after that date will be far more consequential.
For now, during the on-ramp, the Education Department is not reporting missed or late payments to the credit bureaus, nor is it officially placing loans into default or delinquency status. Additionally, the department has said it isn’t referring borrowers to collections during this period. Combined, these leniency measures help shield borrowers’ credit scores and reports from getting damaged by missed payments.
Still, student loans are accruing interest in the meantime, and borrowers who have put their student loans on the back burner during the on-ramp will need to pay back any accrued interest before payments go toward the principal balance.
Outside the on-ramp period, delinquent loans are reported to credit bureaus after 90 days. After 270 days of missed payments, the loan goes into default.
What you can do now: Start making student loan payments if you can afford to so that you’re accustomed to regularly making them on time by the end of on-ramp next fall — and also to keep your accruing interest in check. If you suspect your credit has been incorrectly affected by missed payments during the on-ramp, pull your credit report to investigate (which you can now do for free, every week) and alert the Education Department’s student loan ombudsman.
4. Biden’s new student loan forgiveness program (maybe)
Date: possibly November 2024
What’s happening: After the U.S. Supreme Court struck down Biden’s marquee student loan forgiveness plan, the president vowed to find another pathway to forgive large amounts of student debt.
The Biden administration has been creating a framework for a new forgiveness program through a formal process called negotiated rulemaking, aka “neg reg.” The final public neg reg session ended on Dec. 12, and we’re now getting a better sense of who might qualify for forgiveness — and for how much — under a new plan in 2024.
The forgiveness proposal is expected to be far more tailored than Biden’s first, failed plan, which intended to forgive up to $20,000 per borrower. Analysts who watched the neg reg sessions closely are speculating that the new plan is intended to help borrowers who, due to runaway interest, have student loan balances higher than what they initially borrowed as well as folks who haven’t been able to pay off their loans after 25 years or so.
The crucial question is: When will the program roll out?
“Normally in a neg-reg scenario, we would expect the draft rules in June or July, and the final rules to come out around Nov. 1,” Mayotte says, but because of the presidential elections scheduled for that same month, “we strongly suspect they’re going to try to accelerate this.”
When forgiveness would actually start happening is also up in the air because, like Biden’s previous forgiveness plan, the new one is expected to face legal challenges.
What you can do now: The best thing to do for your financial well-being is to prepare for the worst-case scenario: that the new student loan forgiveness program won’t pan out. Try to keep chipping away at your student loans as best as you can, and utilize the tools that are already available to you, such as the new SAVE plan or other IDRs, the on-ramp, the Fresh Start program or the other student loan forgiveness plans.
