This is stressful time for student loans. Between the payment freeze and courts questioning the legality of the Biden administration’s SAVE repayment plan, there are numerous questions about what comes next.
As a student loan expert with over 15 years of experience in the industry, I understand the confusion. I even have witnessed many program changes, but I even have never experienced a period more complicated and turbulent than the political tug of war now we have seen over the last two years.
With as many aspects in the air as you should approach your student loan repayment strategy?
You cannot control the fate of debt relief programs or income-driven repayment plans, but there are steps you can take to regain control of your student loans. Here are five things you can do without delay and one you shouldn’t do.
💻 Check your student loan balance
Do you understand how much you owe in total on student loans? You could have an idea (or think you have one), but it surely’s vital to ascertain it out.
Many borrowers I even have worked with are surprised to search out that when it comes time to start out repayment, they owe greater than they originally borrowed. This is because most loans, except subsidized loans, start accruing interest from the moment they’re disbursed. Past due interest that has not been capitalized or added to the loan is listed individually from the principal balance. To fully understand your loan balance, it’s important to review your statements fastidiously.
If you know who your student loan servicer is, you can log into your account online to ascertain your balance. If you aren’t sure, you can discover via by logging into your Federal Student Aid account and visiting the My Help page.
🗓️ Prepare now for payments to restart
If you are enrolled in a Valuable Education Savings Plan, your the loans were subject to administrative suspension as of this summer as a consequence of legal challenges to the plan. You missed your payment and your rate of interest was set to zero. This payment suspension is temporary and can hopefully end soon.
If you have not already done so, re-evaluate your monthly budget to incorporate student loan payments.
💰Compare income-driven repayment plans
If you’re worried about SAVE disappearing or need to adjust your budget to accommodate monthly loan repayments, it’s a good idea to look into all the repayment plans available. You can use U.S. Department of Education Loan Simulator to estimate payments and see if you qualify for certain plans. This tool will allow you to ascertain available income-based payment options.
Update: Department recently Pay-as-you-earn and income-based repayment options have been reintroducedtwo IDR plans that were previously withdrawn. You can now apply online (if you qualify).
👩🏫 Consider the PSLF buyout program
The Public Service Loan Forgiveness Program offers debt relief for teachers, nurses and other public sector employees who work in an eligible position for 10 years and make 120 loan repayments. If you are enrolled in SAVE and are near reaching your 120 payment limit, a recent payment stoppage could have delayed your forgiveness. In this case, you can use (*6*)PSLF buyout program.
The PSLF Buyback Program allows you to “buy back” months wherein your loans have been placed on hold – but provided that you get 120 total repayments by doing so.
For example, as an instance you already made 115 qualifying payments before your loan was covered by SAVE. You can apply for the PSLF repurchase program to purchase back the five months that your loans were in forbearance to succeed in the 120 repayment requirement. You’ll apply for the program online, and once approved, you’ll have 90 days to repay your debt for the number of months that you redeem. So in case your monthly payment was $100, you would must pay $500 to receive forgiveness.
You also have to ensure that you meet all other PSLF eligibility criteria, equivalent to working for a qualifying employer and having the right type of loan. If you think you qualify and wish to verify your payment number, you can find your eligible payment amounts in your StudentAid.gov account.
🎓If you’re in class, start paying off the interest
If you’re still in college, your student loans probably have not been paid off yet. While it’s difficult to predict what repayment options can be available in the future, there are proactive steps you can take now.
One of the recommendations is to repay any interest accrued during your time in school. Even small donations may also help reduce the overall cost of your loan in the long term.
If your federal student loan has not yet been repaid, you won’t yet be eligible to enroll in a repayment plan. Repayment begins six months after graduation or if enrollment drops below half-time, unless you enroll in one other program, equivalent to a graduate program, before the grace period ends.
❌ Don’t plan forgiveness as an option
Many borrowers have turned to income-driven repayment plans to cut back their monthly payments and potentially qualify for them student loan forgiveness. However, forgiveness isn’t guaranteed, especially as legal challenges proceed to threaten SAVE’s repayment plan. Programs like PSLF and Income-Driven Repayment Plan Forgiveness carry less risk because they might require congressional motion to alter or eliminate them.
That said, it is usually smart to plan to repay your student loans in full, regardless of any current potential forgiveness options.
