Posted 08 August 2023
Post the Pause; Repaying Your Student Loans
On Friday, June 30th, 2023, the Supreme Court released their standing on President Biden's proposed Student Loan Forgiveness plan, overturning debt relief for over forty million borrowers. Following this decision is also the end of the student loan payment pause that was initiated by the Trump Administration during the COVID-19 pandemic. With payments starting back up, many borrowers are thinking about what steps to take to prepare for paying off their student loan balance. If you are a current college student, beginning payments while you are still in school or during deferment can help lower your overall balance, especially if your loans are not yet accruing interest. If you are an alumnus with loans to pay, there are options available to you as well.
Following the Supreme Court ruling, President Biden released new information regarding loan repayment and future debt relief. One option for repayment is the Saving on a Valuable Education (SAVE) plan. The SAVE plan is a form of income-driven repayment, which aims to provide lower monthly payments to qualified borrowers. The SAVE plan lowers the amount you need to repay if you took out loans for your undergraduate degree and allows for loan balance forgiveness after 10 years of payments instead of 20 years. If the SAVE plan seems like a good fit, you can sign up over the summer prior to loan payments restarting. If you are currently enrolled in the Revised Pay as You Earn (REPAYE) plan, you will be automatically enrolled in the SAVE plan.
If you are worried about resuming payments, there is also a new form of support being provided to borrowers known as the “on-ramp period,” although it is temporary. Borrowers do not need to take any action to qualify. During the on-ramp period, borrowers will receive more grace for late, missing, or partial payments for up to 12 months. Any borrowers who can pay should do so, but the on-ramp period is available for those that need assistance adjusting to making payments again after the loan pause.
Higher education often has an expensive price tag, but it proves invaluable in helping to learn new skills and gain knowledge from new experiences both inside and outside the classroom. The Secretary of Education and Biden Administration are forming an alternative option to provide student loan forgiveness under the Higher Education Act, but it will likely take months to finalize and provide qualified borrowers forgiveness. Updates regarding this new effort toward student loan forgiveness are expected later this year as a top Biden administration official has stated, “We are aiming to do it as quickly as possible.”
Having a strategy to tackle your student loans can help you feel empowered and financially prepared. Although you may feel a variety of valid emotions related to the Supreme Court’s decision, knowing their ruling after months of waiting may provide clarity as you move forward and continue to make financial decisions that support your long-term goals. The repayment freeze ends August 29, 2023. To best prepare, its recommended student loan borrowers reach out to their loan servicers as soon as possible to review repayment options. Some require applications and other supporting documents, so making contact as soon as possible will help ensure you’re prepared and have a plan in place.
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