A Plan for Student Loan Relief

A lot has changed for all of us since March 2020, not the least of which being our financial situations and goals. Some people are in a better spot financially than they were 3 ½ years ago, but many find themselves struggling more than ever before. Federal student loan payments resuming in October only adds to the financial stress millions of people have already been feeling.

If you already received your student loan statement and were startled by the amount due, or perhaps are avoiding checking your email out of concern for when that bill will arrive, there are two things I want you to know: first and foremost, you are not alone! Second, you have options.

What is the SAVE Plan?

Many borrowers have turned to income-driven repayment plans to ease the monthly financial burden of repaying student loans. These plans have not always been easy to navigate or worked as they were intended to, however.

Enter: the new Saving on A Valuable Education (SAVE) Plan.

The Department of Education recently rolled out this brand-new income-driven repayment plan designed to further ease the financial burdens borrowers may experience as payments resume. If you are feeling the pressure of trying to figure out how to make your budget stretch further to fit in a student loan payment, the SAVE Plan may be an option that can help.

More affordable payments

The best news first: the SAVE Plan was designed to offer the most affordable payments of any income-driven plan for “nearly all student borrowers,” according to the Department of Education. The SAVE Plan increases the amount of income that is exempt when calculating your payment (known as “discretionary income”).

The Department of Education notes that single borrowers who make $15/hour or less will have $0 payments if they enroll in the SAVE Plan, and other borrowers can still expect to see a lower monthly payment than on other plans.

The even better news? These payments are expected to be further reduced next summer. The SAVE Plan is set up for these initial payments to be cut in half starting in July 2024.

Creating a plan for student loan relief involves understanding the available options and choosing the best strategies to manage and potentially reduce your student loan debt. Here’s a comprehensive plan to help you navigate student loan relief:

1. Assess Your Current Situation

Loan Inventory: List all your student loans, including federal and private loans, along with their balances, interest rates, and repayment statuses.
Monthly Budget: Review your income, expenses, and current monthly loan payments to understand your financial situation.
Credit Score: Check your credit score, as it will affect your eligibility for certain relief options.

2. Explore Federal Student Loan Relief Options

Income-Driven Repayment (IDR) Plans

Types: Include Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR).
Benefits: Monthly payments are based on income and family size, and any remaining balance after 20-25 years of qualifying payments is forgiven.
Action: Apply for an IDR plan through the Federal Student Aid (FSA) website.

Public Service Loan Forgiveness (PSLF)

Eligibility: Available to borrowers working in qualifying public service or nonprofit jobs.
Requirements: Make 120 qualifying payments under a qualifying repayment plan while working full-time for a qualifying employer.
Action: Submit the PSLF Employment Certification Form annually and whenever you change employers.

Temporary Expanded Public Service Loan Forgiveness (TEPSLF)

Purpose: Provides relief to borrowers who meet the public service requirement but were on the wrong repayment plan.
Action: Review the TEPSLF requirements and apply if you believe you qualify.

Teacher Loan Forgiveness

Eligibility: Full-time teachers in low-income schools or educational service agencies.
Benefits: Up to $17,500 in forgiveness after five consecutive years of teaching.
Action: Apply through the Teacher Loan Forgiveness Application form.

3. Federal Loan Consolidation

Purpose: Combine multiple federal loans into a single loan with one monthly payment.
Pros: Simplifies repayment and may extend the repayment term, lowering monthly payments.
Cons: May increase total interest paid over the life of the loan.
Action: Apply for Direct Consolidation Loan through the FSA website.

4. Private Loan Refinancing

Purpose: Replace existing loans with a new loan at a potentially lower interest rate.
Pros: Can reduce interest rates and monthly payments.
Cons: Refinanced loans lose federal loan protections and benefits.
Eligibility: Requires good credit and stable income.
Action: Shop around and compare offers from multiple lenders.

5. Deferment and Forbearance

Purpose: Temporarily suspend or reduce loan payments.
Deferment: Interest may not accrue on subsidized federal loans during this period.
Forbearance: Interest accrues on all loans.
Eligibility: Depends on specific conditions such as economic hardship, unemployment, or medical expenses.
Action: Contact your loan servicer to apply.

6. Consider Loan Repayment Assistance Programs (LRAPs)

Overview: Various programs offer repayment assistance for specific professions, such as healthcare, law, and public service.
State and Employer Programs: Some states and employers offer repayment assistance.
Action: Research and apply for relevant LRAPs in your field or location.

7. Develop a Long-Term Financial Plan

Budgeting: Create a budget that prioritizes loan payments while covering essential expenses.
Emergency Fund: Build an emergency fund to avoid missing loan payments due to unexpected expenses.
Extra Payments: Make extra payments toward your loan principal when possible to reduce the overall interest paid.

8. Stay Informed and Proactive

Loan Servicer Communication: Regularly communicate with your loan servicer to stay informed about your loan status and available relief options.
Policy Changes: Stay updated on any changes in student loan policies or new relief programs.

9. Seek Professional Advice

Financial Advisors: Consider consulting a financial advisor who specializes in student loan debt.
Nonprofit Organizations: Organizations like the National Foundation for Credit Counseling (NFCC) can provide guidance and support.

A Plan for Student Loan Relief