The new rules will curtail interest accrual and expand relief under several existing student loan forgiveness programs. Here are the details.
Adding to the problem is that certain events can cause that accruing interest to be added back on to the loan principal balance through a process called interest “capitalization.” Since interest is charged as a percentage of the loan principal, capitalization has a compounding effect, where interest accrues on interest. This can lead to substantial balance increases.
For Borrower Defense to Repayment — a loan forgiveness program for borrowers misled or defrauded by their school — the new rules will strengthen protections for borrowers and expand the avenues of relief. The rules will allow the Education Department to provide individual or group relief, and will expand the categories of school misconduct that can give rise to a borrower claim. Borrowers will also be entitled to full relief for approved Borrower Defense claims.
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