Student loan payments, which have been on pause and accruing no interest since early 2020 at the start of the pandemic, are about to start accruing interest again as soon as September. Payments will be required again in October.
ICYMI, there is a new Income-Driven Repayment Plan option, called Saving on a Valuable Education (SAVE) that could significantly reduce monthly payment amounts! SAVE replaces the REPAYE income-driven repayment plan and will be eligible for borrowers based on a calculation of their discretionary income (income excluding essentials like rent/food) and family size in relation to poverty levels.
SAVE is much more generous than the REPAYE program in a few different ways. Most borrowers could see a 40% reduction in payment amounts! The NYT reported that “A single person who makes less than $32,805 a year would make $0 monthly payments. The same goes for someone in a household of four with income below $67,500. That should help an additional one million low-income borrowers qualify for a zero-dollar payment.”
Furthermore, if your payment amount does accrue interest, there is now a cap on how much interest can accrue so that borrowers may escape the no-win scenario of being unable to pay off their loans while the interest outpaces their payments. A final advantage involves tax filings for married couples.
Read below for the in’s and out’s of SAVE, and see if you might qualify!
How SAVE works:
As with most income-driven repayment plans, a formula is created for you based on your discretionary income and your family size, and then that number is weighted against the federal poverty level to determine your qualifying payment amount. With SAVE, a greater portion of your discretionary income is now shielded from student loan payments than ever before, meaning, you can keep more of your own money.
If your qualifying payment amount does not exceed the interest amount, the interest will be eliminated. Again, you will not accrue interest that exceeds your payment amounts! Interest will be cancelled for those who qualify for a $0/month payment.
With tax filings, married couples who file separately will no longer have to include their spouse’s income in their income totals when applying for SAVE, and their spouse will not count in the family size.
How Do I Know if I’m Eligible:
Borrowers with Federal undergraduate and graduate loans are eligible; undergraduate loans are eligible for greater savings. Borrowers who were already on REPAYE will be automatically enrolled in SAVE. Borrowers in income-driven repayment plans who fell behind on payments before the pause (but not technically in default) will automatically be enrolled. Borrowers in default (meaning, missed 9 months or more payments) before payments were paused are eligible for a “fresh-start” to enroll in SAVE or any other repayment plan, but must steps to enroll must be taken by September 2024.
Parent PLUS loan holders are excluded.
What Do I Need to Do Now:
If you were not in REPAYE already, and you think you might be eligible for SAVE, enroll now! The application process is expected to take 4 weeks. You will be asked to update your income and family size annually. During enrollment, you’ll have the opportunity to give the Student Loan provider access to your tax records each year, for automatic re-certification rather than having to update your information yourself.
Watch for Scams!
Be vigilant and only use student loan resources that you trust. Never click on a link via email, go to the source and verify that either StudentAid.gov needs something from you, or your loan service provider needs something from you.
Resources:
Studentaid.gov in order to find your service provider and loan type. You might need to consolidate your loans or sign up for an income-driven repayment plan in order to be eligible for SAVE.
Use this Loan simulator tool to compare the best repayment plan options for you.
For SAVE enrollment application: StudentAid.gov/SAVE.
TISLA for a legit non-profit offering all advice Student Loans.
Unlocking Abundance 