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Will the new student loan changes bring borrowers closer to debt forgiveness?
The U.S. Department of Education recently announced a number of massive changes to the federal student loan system, which it says could bring millions of borrowers closer to debt forgiveness. Federal student loan borrowers have long run into serious issues, including misinformation from their servicers, too many choices and complicated terms.
What’s wrong with federal student loan borrowers?
Federal student loan borrowers have long run into a number of serious issues, including misinformation from their servicers, too many choices and complicated terms. The U.S. Department of Education is now trying to fix those problems.
What changes could come to the student loan industry?
Changes to how interest accrues: The practice of interest capitalization on federal student loans, in which accrued interest is added to the principal balance, would also be eliminated in cases when a borrow exits a forbearance or defaults on their loan.
What happens when your student loan payments turn back on?
When the payments turn back on, here are some of the changes borrowers will see. Holders of federal student loans can put their payments on pause in an option known as a forbearance. Each forbearance can be as long as a year, and borrowers can tap the relief up to three times.