Act Now for New Student Loan Repayment Options
While the courts struck down the student loan forgiveness program, there are still new programs that can significantly assist borrowers in managing their student loans. Below, we outline two of those programs and how to access them.
Saving on Valuable Education (SAVE)
Currently, there are several different kinds of income-driven repayment plans for borrowers with federal student loans. Under these plans, payments are based on a borrower’s income and family size, regardless of how much outstanding student debt is owed.
As of August 1st, a new repayment plan was rolled out. Called the Saving on Valuable Education (SAVE) plan, it is replacing the Revised Pay as You Earn (REPAYE) plan. The SAVE plan raises the income exemption from 150% above the poverty line to 225%. This means more people will qualify for lower payment amounts. Lower payments may be helpful as many people are experiencing an increase in their normal living expenses like rent, groceries, and gas. Payments could be as low as $0 a month depending on income and family size. Under an income-driven repayment plan, these payments would count toward student loan forgiveness.
Another benefit of the SAVE plan is that unpaid interest will not accrue if a person makes their full monthly student loan payments on time. This will be helpful in keeping the amount of debt from continuing to grow, despite making payments. For instance, if the monthly loan payment is $50 and the accumulated monthly interest is $60, the remaining $10 would not be charged or added to the loan balance.
And finally, unlike the REPAYE plan, if a borrower is married but files their taxes separate from their spouse, the spouse’s income will not be calculated in their total income. Payments will be based on the income from the borrower. Again, this may help keep payments at a more affordable level, but also allows for borrowers to make larger payments if they have the funds available.
SAVE Eligibility and Enrollment
People who are currently enrolled in the REPAYE plan will automatically be switched to the SAVE plan. Other borrowers can apply for the SAVE plan by submitting a recently updated application for an income-driven repayment plan found here on the Department of Education’s website.
To determine what plan you are currently in, log into StudentAid.gov. There you will find your balances, loan servicer, and historical information about your loans. (Learn more about accessing your profile in our article Student Loan Repayment Restart.)
The following types of loans qualify for the SAVE repayment plan:
- Direct subsidized,
- Direct unsubsidized,
- Direct consolidation loans, and
- PLUS loans made to graduate students.
Borrowers with Federal Family Education Loans (FFEL) or Perkins Loans need to consolidate into a Direct loan to qualify for SAVE.
Parents who took out a federal PLUS loan to help their child pay for college are not eligible for the new repayment plan.
Fresh Start for Defaulted Student Loans
For borrowers who may have student loans in default (past due), the Federal government is offering a one-time program called Fresh Start to assist people in putting their loans back on track. The program offers benefits like:
- Removing the default record from a credit report,
- Showing student loans as in “repayment” on the credit report,
- Stopping collection calls,
- Reinstating access to federal student aid, so people can return to college, and
- Access to Income Driven Repayment Plans.
Not all loan types are eligible for Fresh Start, so it is important to contact the Department of Education through one of the following options:
- Online—Visit myeddebt.ed.gov and log in to your account. If you have never used the website, you can create an account.
- Phone—Call the Department of Education’s Debt Resolution group at 1-800-621-3115.
- Mail—Write to Default Resolution Group, P.O. Box 5609, Greenville, TX 75403. In your letter, include your name, social security number, date of birth, and the following: “I would like to use Fresh Start to bring my loans back into good standing."
People who are not eligible for Fresh Start may be eligible for a Rehabilitation plan. Utilizing a rehabilitation plan, a borrower can get out of default by making a certain number of consecutive, on-time payments to their loan holder under a rehabilitation agreement. (“Federal Student Aid”) To begin the loan rehabilitation process, people must contact their loan holder. If you’re not sure of your loan holder is, log in to the StudentAid.gov website and select “View Details” under “My Aid.”
If you or someone you know needs assistance with student loans, contact AFS. Our certified counselors may be able to help them understand and access programs for managing student loan payments or assist in freeing up income going towards other debts, to prepare for making student loan payments. Get started today! 888-282-5811 or www.myfinancialgoals.org
Published Aug 7, 2023.