Shakespeare Blog: View from the Lake

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Student Loan Payments Set to Resume

Written ByBrian Ellenbecker, CFP®, EA, CPWA®, CIMA®, CLTC®

Book pile - student

After more than three years of a pause on student loan interest accruals and payments, those loans resumed accumulating interest on September 1, and payments are set to resume in October. There have been some notable changes to student loan payments since they stopped in 2020, so being aware will be important as interest begins to accrue again, and payments start to be made.

Student Loan Legislative Changes

New Income-Driven Repayment Plan. On July 31, the White House announced the Saving on a Valuable Education (SAVE) Plan, which is a new income-driven repayment option. Under this plan, monthly payments are capped at 5% of the borrower’s income for undergrad students or 10% of income for graduate students. If payments are made, interest will not accumulate on the remaining loan balance. Borrowers who are currently on the REPAYE plan or recently applied, will be automatically enrolled in the SAVE plan. If a borrower is on a different repayment plan, they should consult the Department of Education’s website to learn more about the SAVE plan and how to apply.

Student Loan Forgiveness. The Biden administration introduced a plan to forgive $10,000 of student loan debt for all borrowers with income under certain limits or $20,000 for Pell Grant recipients in 2022.  However, the Supreme Court struck down this plan in June of 2023. The administration is still attempting to enact some type of loan forgiveness. However, any additional forgiveness proposed may not survive constitutional challenges if brought to the Supreme Court again. At this stage, the best planning strategy is not to assume any additional forgiveness provisions. If they do, it will be an added bonus.

Other Provisions Being Considered. The White House announced plans to create a 12-month “on-ramp” to repayment. According to the White House Press Release on June 30, “…from October 1, 2023 to September 30, 2024…financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.” The goal is to give borrowers who cannot make payments right away time to adjust. No action needs to be taken to qualify for the on-ramp.

Steps to Take Now

While loan payments won’t start until October, it’s important to reacquaint yourself with your student loan debt and current financial situation.

Review Your Current Loan(s). Be sure you know what your current balance is, your interest rate, and when payments are due by contacting your loan servicer. Most of this information should be easily obtainable on their website. Some companies are no longer servicing loans, so it’s possible you may have a different provider than you did before payments were paused. This is also a time where scammers will appear and try to take advantage of either unfamiliarity or “rustiness” in dealing with this topic again.

Look into Your Repayment Options. Your personal or financial circumstances may have changed since your last loan payment over three years ago. Repayment options may also have changed. In addition to the new SAVE plan, there may be other options you qualify for now. You can explore the different repayment options available to you here:

Review Your New Budget. Now that you have to make loan payments again, it may impact your overall spending. Review your budget now to give yourself the most time possible to make any adjustments to your spending before you have to resume payments in October. The exact date in October when repayment will need to start will depend on your loan servicer.

If you have additional questions on student loans or how they impact your financial situation, please reach out to your Shakespeare advisor for help.