Changes to Student Loans Might Be Coming Your Way

Changes to student loans are on the horizon. Here’s a rundown of what to expect for the upcoming year.

More borrowers might become eligible for college debt forgiveness. In March, President Obama revealed his proposed budget for next year. A portion of the budget is reserved for more education spending on programs such as Pay as You Earn.

Pay as You Earn (also known as income based repayment) places a borrower’s monthly student loan payments at ceiling of 10 percent of his or her income.

In addition, Pay As You Earn features debt forgiveness for any student loan balance that remains after 20 years. If you work for the government or certain nonprofit organizations, your debt will be forgiven after just 10 years.

The only problem is that many people were not eligible for the program. One drawback to Pay As You Earn, is that eligibility is limited to borrowers who took out loans after Oct. 1, 2007 and demonstrate a “financial hardship.”

The Mint Grad reports that President Obama’s new budget proposal would do away with the 2007 provision, therefore, any one borrower, regardless of when they took out their student loans, would be able to enroll.

Credit checks could become the norm. At the end of the year, the Higher Education Act will expire. However, it might be here to stay if Congress has its way. One possible change would be to make credit checks more common for student loan borrowers.