When your federal student loan payment is about, the government might just make it easier for you to get back on your feet.
The Student Loan Forgiveness and Repayment Reconciliation Act (SLFRA) would let borrowers refinance their federal student loans if they file for bankruptcy or make a big emergency payment.
The bill would also allow borrowers to refinance up to $2,000 of their federal loan debt if they’re eligible.
That means if you’re in the market for a home and you have outstanding federal student debt, you could refinance the balance and refinance your federal loans as long as you file your paperwork by July 2018.
This could be a big boon for those struggling to pay their student loans off.
“The refinancing will enable borrowers to get off their loans faster and save them time and money,” said Daniel J. Bohn, president and CEO of the Consumer Federation of America.
Borrowers who have been denied a refinancing under the past three years can apply for a second loan modification that would allow them to refortify up to the amount of their outstanding federal loans.
Those applications will take about a week.
The bill also includes language that would let eligible borrowers refile up to a maximum of $1,250 of their loans in a single loan modification.
Bohn said this could make refinancing much easier for many borrowers.
“With the refinancing provision in the bill, a borrower can refinance any amount of debt, and that is a huge benefit,” he said.
“Borrowing in the current climate can be overwhelming and frustrating, especially for those who have outstanding student loans,” Bohn added.
Rep. Jim Banks (D-Ohio), a sponsor of the bill and a former chairman of the House Ways and Means Committee, said he’s hopeful this legislation will help alleviate the pressure on borrowers.
Banks said the legislation could help students who are struggling to make payments on their federal loans by making it easier to refit their loans as they pay down the debt.
Bills sponsored by Banks and Reps.
Sam Johnson (D) of Louisiana and Tom Graves (R) of Georgia also would make it simpler for borrowers to reduce or eliminate their federal income-based repayment plans, or EBRPs, to reduce their student loan payments.
Under the new legislation, EBRP reduction programs would no longer be available for students who make a significant portion of their income from wages, employment, and self-employment.
Borrowers would still be eligible for a reduction if they are employed full time, earn less than $25,000 per year, have a household income less than 100 percent of the federal poverty level, or are in a student loan repayment program.
Bandsaid in a recent report from the National Consumer Law Center that found more than 3 million borrowers would be eligible to refile their federal education loans if the legislation becomes law.
He said that number is still a small fraction of the millions of students who could benefit.
“I think this bill is a good step in the right direction, and I am optimistic it will help many students,” Bandsaid said.