What You Need To Know About Repaying Student Loans

Payments were put on a three-year hiatus due to the COVID-19 pandemic. Yet, federal student loan payments resumed on October 1, 2023. These payments will be in effect for about 44 million borrowers.

If you are someone who used a federal student loan, you should expect a bill within 21 days of the due date with the amount of money you owe monthly. It’s important to note that interest in these payments will start in September.

But before you do anything, you need to find out how much money you owe and when you owe it. You can find your payment date through the loan service you used. The bill due date could be any time throughout October. If you do not remember the loan service provider you used, you can also check on your Federal Student Aid portal, and then log on to your service portal.

Didn’t make any payment during the hiatus and all this information seems overwhelming? Well, don’t panic. We’ve got you covered. Here is what you need to know.

New SAVE Plan: What Is It?

If you receive your bill and it’s something you can’t afford comfortably, then you should look into the new SAVE plan (Saving on a Valuable Education), an income-driven repayment plan. According to the Department of Education, the SAVE plan will allow the lowest-income borrowers to see their payments fall to $0.83 per each dollar they owe. People who make below minimum wage will not have to make monthly payments. This new plan is not for everyone, so make sure you check the requirements before applying.

The SAVE plan sets your monthly payments based on your income and, the number of people in your household. As of now, payments will be 10 percent of your disposable income. This means money left over after your essential expenses including house, taxes, food, and insurance, among other essential bills. Make sure you look into SAVE. You never know.

What If Your Payments Are Too High?

If you are not eligible for the SAVE plan, there are other options for you.

To help borrowers who might struggle when payments resume, President Joe Biden announced a 12-month grace period. You should use this grace period wisely, and save money in advance that way you can meet your payments on their due dates once the grace period is over. However, you are still allowed to (and should) make payments during the 12-month grace period. If you decide not to, your credit score and risk of default will not be hurt. However, interest will increase over time whether or not you make payments.

Are There Programs To Help With My Student Loan Debt?

There are a few ways you can avoid paying your student loan debt. The Public Service Loan Forgiveness program offers student loan debt cancellation after 10 years of regular payments. This only applies if you’ve been employed by a government agency or nonprofit. They also offer some income-driven repayment plans that could cancel the remainder of the student loan debt after 20 to 25 years.

Will Student Loans Be Canceled?

A recent push by President Biden to cancel student loans was denied by the Supreme Court. The grant would have canceled between $10,000 and $20,000 of debt per student and would have impacted 43 million Americans. Even though this attempt was shut down, there is still hope in the future. President Biden and his team will make another attempt through the Higher Education Act of 1965. So, expect another proposal in the future.

The Department of Education asked President Biden and his committee to focus on helping the people who are drowning in interest. Specifically, people who owe more than they initially took out, and those who have been paying off student loans for decades. Yet, for the next attempt to have a higher chance of getting passed by the courts, the relief will need to be narrower, according to experts.

Are you ready to repay back your student loans?