October 31, 2022
If you have a federal student loan, the Department of Education just released some new rules. You need to pay attention to this.
No it’s not about student loan forgiveness…
It’s about what happens after (or if) you get the forgiveness of $10,000 or $20,000 dollars. Lots of borrowers will still have student loan debt and you know all that interest piles up. So today the Department of Education announced — starting on July 1, 2023, a new rule will prevent that interest from spiraling onto your balance.
This may get a little technical but hang with me. The rule that was announced today tackles interest capitalization which happens when accrued interest is added to the original loan balance, so future interest grows on that higher amount instead of the original loan amount. And student loan borrowers know that interest is what’s killing them. This new rule eliminates all instances where interest capitalization is not required by law. This means interest will no longer be added to a borrower’s principal balance the first time a borrower enters repayment, when a borrower leaves forbearance, leaves any income -driven repayment plan or enters default.
And that’s not all. The new rules announced today also make it easier for students who’ve been defrauded by their schools to get their loans canceled by the government through the borrower’s defense program, they overhaul the public service loan forgiveness program making it easier for public servants to get their federal loans canceled after a decade of payments and so much more. If you want to read the actual rules, I’ll email them out through my news girl news roundup email tonight.
More from the Department of Education here.
Read the new rules from the Department of Education here.
I’m already paying compound interest from years of being unable to pay even the full interest as payment. I’m glad this is being resolved going forward, but any indication of compounded interest being removed for those of us in indentured servitude to our loans?
If you scroll to the bottom of this blog post you will see the link to the Department of Education’s new rules