Finance

Some student loan borrowers are getting refunds on top of loan forgiveness, here’s who qualifies

Published

8 months ago

April 2, 2024

Business Finance News

Borrowers who have been paying their loans over 20 years may qualify for a refund. (iStock)

Some student loan borrowers who have been making payments for over a decade under income-driven repayment and forgiveness programs have yet to see the forgiveness they were promised.

To correct this, the Biden administration is providing that forgiveness, and, as an added bonus, some borrowers are also receiving refunds for past payments, CNBC reported.

“Loan servicers were not tracking the number of qualifying payments, and the automatic forgiveness was not occurring,” higher education expert Mark Kantrowitz explained.

“As a result, some borrowers have been making payments for years, or even decades, beyond the point at which they should have received forgiveness.”

This lack of forgiveness has caused some borrowers to pay loans longer than required by these programs. In response, the Biden administration is reviewing the payment histories of borrowers and awarding forgiveness for those who have been in repayment for 20 to 25 years.

Student loan refunds are also being awarded to those who continued to make payments after they were eligible for forgiveness.

If you can qualify for a student loan refinance at a lower rate than you’re currently paying, there are often few downsides to refinancing. Use Credible to compare student loan refinancing rates from multiple private lenders at once without affecting your credit score.

NEW STUDENT LOAN LAWS CAN HELP BORROWERS MANAGE BETTER IN 2024

3.9 million borrowers have received student loan forgiveness so far

While Biden’s initial student loan forgiveness plan was struck down, the administration has done everything in its power to reduce debt for borrowers.

So far, the administration has canceled debt for about 3.9 million borrowers, resulting in nearly $138 billion in forgiveness.

More than 793,000 borrowers received forgiveness through adjustments to Public Service Loan Forgiveness (PSLF) programs. An additional 930,500 borrowers saw forgiveness through improvements to income-driven repayment plans.

Borrowers with total and permanent disabilities have also had their loans automatically discharged. About 513,000 borrowers saw $11.7 billion in forgiveness due to these discharges.

Also, to date, the administration has forgiven $22.5 billion as a result of closed school discharges and court settlements.

Many of the loans forgiven are a result of Biden’s SAVE Plan, which is designed to help borrowers better afford their payments. Currently, 7.5 million borrowers are enrolled in the plan. Of those borrowers, 4.3 million have $0 payments.

If you have private student loans, unfortunately, federal relief doesn’t apply to you. If you’re looking to lower monthly payments and ease the burden of student loan debt, consider refinancing your student loans. Lock in some of the lowest interest rates ever via the online marketplace Credible.

STUDENT LOAN BORROWERS FACING FINANCIAL HARDSHIP MAY QUALIFY FOR BIDEN’S NEW ROUND OF DEBT RELIEF

Other student loan initiatives help borrowers save for retirement

To help borrowers save for retirement while also paying down their student loans, the Secure Act 2.0 was introduced in 2022. A provision of the act, set to kick-in this year, is Section 110.

Section 110 allows an employer to match an employee’s student loan payment with an equivalent retirement contribution. This is intended to encourage borrowers to make payments since they’re getting a match to their retirement account in exchange.

“In today’s age of volatility, protected retirement income solutions can provide employees the financial security they need to feel confident in their futures,” Eric Stevenson, the President of Nationwide Retirement Solutions, said.

“By offering a steady stream of predictable income for life, employees can stay on track toward their retirement goals and ensure they don’t outlive their income. Employers can play a critical role in minimizing delayed retirements by offering these solutions to create a world-class benefits package.”

To combat costly student loan payments, refinancing can lower your rates and monthly payment. If you’re considering refinancing, make sure to compare student loan refinancing rates before you apply. Credibe can show your new rates from multiple lenders all in one place.

MORE STUDENT LOAN FORGIVENESS IS ON THE HORIZON, AS U.S. COLLEGES COMMIT TO COST TRANSPARENCY

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

Finance

Visa & Mastercard execs grilled by senators on high swipe fees

Published

6 hours ago

November 19, 2024

Business Finance News

The Senate Judiciary Committee convened on Tuesday for a hearing on the alleged Visa–Mastercard “duopoly,” which committee members from both sides of the aisle say has left retailers and other small businesses with no ability to negotiate interchange fees on credit card transactions.

“This is an odd grouping. The most conservative and the most liberal members happen to agree that we have to do something about this situation,” committee chair and Democratic Illinois Sen. Dick Durbin said.

Interchange fees, also known as swipe fees, are paid from a merchant’s bank account to the cardholder’s bank, whenever a customer uses a credit card in a retail purchase. Visa and Mastercard have a combined market cap of more than $1 trillion, and control 80% of the market.

“In 2023 alone, Visa and Mastercard charged merchants more than $100 billion in credit card fees, mostly in the form of interchange fees,” Durbin told the committee.

Durbin, along with Republican Kansas Sen. Roger Marshall, have co-sponsored the bipartisan Credit Card Competition Act, which takes aim at Visa and Mastercard’s market dominance by requiring banks with more than $100 billion in assets to offer at least one other payment network on their cards, besides Visa and Mastercard.

“This way, small businesses would finally have a real choice: they can route credit card transactions on the Visa or Mastercard network and continue to pay interchange fees that often rank as their second or biggest expense, or they could select a lower cost alternative,” Durbin told the committee.

Visa and Mastercard, however, stand by their swipe fees.

“We consider them incentives, some people might consider them penalties. But if you can adopt new technology that reduces the risk and takes fraud out of the system and improves streamlined processing, then you would qualify for lower interchange rates,” said Bill Sheedy, senior advisor to Visa CEO Ryan McInerney. “It’s very expensive to issue a product and to provide payment guarantee and online customer service, zero liability. All of those things, and many more, senator, get factored into interchange [fees].”

The executives also warned against the Credit Card Competition Act, with Sheedy claiming that it “would remove consumer control over their own payment decisions, reduce competition, impose technology sharing mandates and pick winners and losers by favoring certain competitors over others.”

“Why do we know this? Because we’ve seen it before,” Mastercard President of Americas Linda Kirkpatrick said, in reference to the Durbin amendment to the 2010 Dodd-Frank Act, which required the Fed to limit fees on retailers for transactions using debit cards. “Since debit regulation took hold, debit rewards were eliminated, fees went up, access to capital diminished, and competition was stifled.”

But the current high credit card swipe fees for retailers translate to higher prices for consumers, the National Retail Federation told the committee in a letter ahead of the hearing. The Credit Card Competition Act, the retail industry’s largest trade association wrote, will deliver “fairness and transparency to the payment system and relief to American business and consumers.”

“When we think of consumer spending, credit card swipe fees are not the first thing that comes to mind, yet those fees are a surprisingly large part of consumer spending,” Notre Dame University law professor Roger Alford said. “Last year, the average American spent $1,100 in swipe fees, more than they spent on pets, coffee or alcohol.”

Visa and Mastercard agreed to a $30 billion settlement in March meant to reduce their swipe fees by four basis points for three years, but a federal judge rejected the settlement in June, saying they could afford to pay more.

Visa is also battling a Justice Department lawsuit filed in September. The payment network is accused of maintaining an illegal monopoly over debit card payment networks, which has affected “the price of nearly everything,” according to Attorney General Merrick Garland.