The U.S. Department of Education released new regulations for federal student loans, with the aim of making it easier for graduates to pay off their debts. The New York Times reports that more than 600,000 federal student loan borrowers who began repaying their debts in 2010 defaulted on their loans last year. Get all the information on the new regulations below and find out whether you can benefit from them.
1. What it is: Under the new federal law, people who default on their federal student loans can rehabilitate them by making nine timely payments based on the Income-Based Repayment Plan's guidelines. The guidelines cap repayment at 15 percent of the borrower's income. After the nine payments have been made, the borrower's slate is wiped clean, erasing the default status. This way, universities can't fault the borrower and deny them the opportunity to take out more federal education loans.
2. It will be easier to be placed in forbearance: The new regulations also state that instead of having to write a request for forbearance, borrowers can now request one verbally in person or over the phone, which anyone more than 270 days late making a payment can request. Oral forbearances have a 120-day limit, however, and a borrower cannot make them back-to-back.
3. The government may be emailing you: The Department of Education will email the roughly 3.5 million federal student loan borrowers from now until the end of the year to notify them of the new regulations. The email will outline the new regulations as well as explain the Income-Based Repayment Plan.
4. How if affects private student loans: These new regulations do not apply to private student loans; only federal government loans will have to follow the new regulations.
5. When it takes effect: The new regulations will be implemented in July 2014.