Get ready everyone! While this may seem like the boy who cried wolf, student loans are going back into repayment beginning February 1^st, 2022. The Biden administration has stated that this will be the last pause on payments and interest.

Remember, $0 payments made during this period will count towards PSLF. We highly recommend that you keep track of your payments, especially if you are hoping to achieve PSLF.

Over the last few months we have seen some shake-ups in the servicer industry. PHEAA, also known as MyFedLoan Servicing, and Granite State announced they were not going to renew their contracts with the Department of Education. If your servicer is MyFedLoan or Granite State, your loans are not going away. The Department of Education owns your loans, and the servicer just takes care of some of the back-end stuff. You will see your loans transferred to a new servicer soon. To ensure that nothing falls through the cracks, it is a good idea to document everything.

All contracts with servicers expire at the end of the year, and it is a question of who will get renewed (and who wants to be renewed). We will know more in the coming months.

If you were filling out your paperwork correctly for PSLF, MyFedLoan was your servicer. MyFedLoan administered the PSLF program, so there will be some more changes. PSLF is not dead, and this does not mean that it is going away. A new servicer will be chosen to administer the program.

The Biden administration has not yet cancelled student debt for borrowers, and it is still a toss-up on whether that will occur. Changes to student loans to benefit borrowers still appear to remain a priority to the administration, but student loan forgiveness may not be the avenue taken.

Republicans are starting to get on board with addressing the issue, but they still remain opposed to outright forgiveness. Senator Marco Rubio (R-FL), a prominent member of the party, recently proposed an interesting program. In his proposal, titled Leveraging Opportunities for Americans Now (LOAN) Act, would eliminate interest on federal student loans. Instead of having interest that accumulates (causing lots of headaches during residency, for example), borrowers would instead have a financing fee attached to their loan.

The financing fee would differ depending on the type of loans taken out. For undergraduate loans, it would be equal to 20% of the principal amount of student loans. For graduate loans, it would be equal to 35% of the principal amount.

This differentiation does not come as a surprise, unfortunately. There is a stereotype on Capitol Hill that graduate borrowers are automatically wealthy, which as you know, is not the case. As an attending, this would be an insignificant cost, but as a resident, it hurts. Luckily for graduate borrowers such as yourselves, teachers are also graduate borrowers. The teacher’s union has a lot of political clout, and can likely be counted on to at least try to decrease this discrepancy.

The plan does include a provision to reduce or refund the financing fee based on a student loan borrower’s income. The exact process and amounts are currently unclear, but this could be beneficial during residency.

Another component of the LOAN Act is to have all borrowers automatically placed in an income-based repayment plan (IBR) rather than the standard payment. While an IBR payment is going to be less than or equal to the standard payment (depending on income levels), it is not the best income-driven repayment plan for most new borrowers. Still, this is a great first step.

Sen. Rubio actually proposed this back in 2019 and did not get any traction on it. However, student loans are in the conversation more currently, so 2021 could be a different story. In any event, it is encouraging to see Republicans engaging in this issue rather than shutting it down completely. We can hope for a bipartisan solution to assist borrowers, and hopefully avoid political gridlock.