FUTURE Act
Written by Paolo LaPietra
As many of you have probably heard, the SECURE Act was passed in December of 2019 and has created some serious buzz within retirement discussions. Our president & CEO, Steve Bouchey, discussed the important characteristics of this new bill during our State of the Economy presentations in January. While the SECURE Act is significant for soon to be retirees, the FUTURE Act is equally, if not more important to current and prospective college students, as well as college graduates.
So, what is the FUTURE Act? FUTURE Act, standing for “Fostering Undergraduate Talent by Unlocking Resources for Education Act,” provides permanent funding to historically black colleges and streamlines the FAFSA (Free Application for Federal Student Aid) process. In my previous blog, I discussed the importance of filling out the FAFSA for all current and prospective college students. Why is there a need to streamline the process? According to the Department of Education, roughly 57% of high school seniors completed their FAFSA in 2019, which was down 0.4% compared to 2018. With completion percentages being below 60% and declining, it’s apparent that the arduous process of submitting the FAFSA is a significant barrier for students. To simplify and shorten this process, the FUTURE Act now allows automatic data transfer from the IRS to the Department of Education. This automatic data transfer will eliminate up to 22 questions on the FASFA form. According to the Senate HELP Committee, this change will simplify the process for 20 million American families.
The new automatic data transfer will also help college graduates with student loan debt. Over eight million borrowers are currently enrolled in an income-driven repayment (IDR) plan. An IDR plan bases a borrower’s monthly payment on their income and family size. To put this into numbers, a borrower with $30,000 of student debt and a yearly salary of $35,000 would owe roughly $140 a month on an IDR plan, compared to $350 a month on a traditional repayment plan. IDR plans require a yearly renewal process, and if a borrower misses the deadline, it’s detrimental to their cashflow and increases their chances of delinquency. The new automatic data transfer will allow the Department of Education to access the income information needed for an IDR plan, eliminating the yearly renewal application for a borrower. This means borrowers will no longer run the risk of missing the deadline and facing the financial repercussions.
The FUTURE Act will undoubtedly have a lasting impact on past, present, and future college students and their families.