What You Need to Know About Student Loan Repayments

Student loan forgiveness has been struck down by the Supreme Court. 

President Biden’s original plan to forgive up to $20,000 for eligible borrowers has officially been struck down by the Supreme Court. Even if you applied back in the fall of 2022 and your application was approved, you will not have your loans forgiven.  

Loan repayments are set to restart in October.

Student loan monthly payments have been on pause since March 2020; during that pause, no interest has been accruing. Student loan forbearance has been extended a number of times, but now interest will begin to accrue on September 1st, 2023 and monthly payments are set to begin in October 2023.  

The Department of Education is also instituting a 12-month “on-ramp” for borrowers. This 12-month period, from October 1, 2023, to September 30, 2024, is to protect borrowers who miss monthly payments. Borrowers who miss a payment during this period will not be reported to credit bureaus, placed in default, sent to collections, or even considered delinquent. 

A new repayment plan is now available to borrowers.

A new income-driven repayment plan will be available to borrowers. This plan stands to be the most affordable repayment plan ever created. The plan is called Saving on a Valuable Education (SAVE) and it will be replacing the Revised Pay-As-You-Earn (REPAYE) plan. To get on the SAVE plan you need to apply for an Income-driven repayment (IDR) plan and select REPAYE. Since SAVE is not currently available, you will apply to be on REPAYE and your plan will automatically switch to SAVE once it becomes available and REPAYE is phased out. The SAVE plan should be available later this summer. 

Highlights of the plan include: 

  • Cutting the payment amount from 10% of discretionary income to 5% 
  • Increasing the amount non-discretionary income from 150% of federal poverty levels to 225% 
  • Opportunities to have loans forgiven between 10-20 years 
  • Interest will not capitalize on the loan if monthly payments are made, meaning your loan balance will not grow over time 
  • Ability to exclude a spouse’s income if you file your taxes separately 

Your Next Steps 

If you’re already on an IDR plan… 
  • Log in to StudentAid.gov and go to your My Aid page, scroll down, and view your loans. Each loan will list a repayment plan. If you see that you are in the REPAYE Plan, that means you’ll automatically be enrolled in the SAVE Plan later this summer. If you’re on a different repayment plan, you’ll need to switch into REPAYE now.
If you’re not on an IDR plan… 
  • You’ll need to go to StudentAid.gov and apply for an Income-Driven Repayment plan. There are 4 different plans to choose from and an estimator for which will give you the lowest monthly payment 
Recertify your income. 
  • All borrowers will need to recertify their income, but not necessarily right away. Each servicer has a different timeline for when they will start recertifying incomes for borrowers; most servicers will resume in December 2023. If you have FFEL loans, you should stick to your normal recertification schedule.  
Determine which repayment plan you should be on. 
  • This depends on your situation and what each plan has for your monthly payment. The new SAVE plan seems promising, and we anticipate many borrowers moving forward with it, as it should have the lowest monthly payment.  
Get ready to start paying on your loans again. 
  • It’s been over 3 years since student loan payments have been required. In that time, a lot of Americans have bought houses, cars, picked up new hobbies, etc. It’s time to go back to your budget and make sure you’re able to make your loan payments on time and in full.  

Ultimately, we recommend that borrowers consider enrolling in the SAVE plan—which offers a great opportunity for eligible borrowers to save a lot of money on their student loan repayments—and suggest that most borrowers not take advantage of the 12-month “on-ramp.” Student loans have been a hot political topic for the last several years resulting in a number of unfulfilled promises. While frustrating, we don’t recommend missing your loan payments or waiting until October 2024 to begin repaying based on unreliable public discourse.  

Interested in working with a professional to plan for student loan repayment? We’re here to help. Contact our team for more information. 

Commas is a wholly-owned subsidiary of Truepoint Inc., a fee-only Registered Investment Adviser (RIA). Registration as an adviser does not connote a specific level of skill or training. More detail, including forms ADV Part 2A and Form CRS filed with the SEC, can be found at www.usecommas.com. Neither the information, nor any opinion expressed, is to be construed as personalized investment, tax or legal advice.