Navigating student loan repayment is often tricky, but we are currently in one of the most confusing times for federal borrowers. It you are feeling overwhelmed, you are not alone. Let’s review the top questions borrowers are asking.
Q: What is going on with the SAVE plan?
A: The SAVE plan is the newest income-driven repayment plan that offered many borrowers more manageable monthly payments; however, the program is paused due to pending lawsuits. At this time there is still no resolution and borrowers who are on the SAVE plan or apply to move onto the SAVE plan are put into an interest-free forbearance. This forbearance is currently expected to last until at least April 2025.
Q: What should borrowers in the SAVE forbearance do now?
A: A vital detail of the interest-free forbearance is that this time is not providing months of credit towards either Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) Forgiveness. Borrowers have a few options to consider.
- Continue to utilize the interest-free forbearance and hold off on repayment, understanding this is delaying paying off or achieving forgiveness. Borrowers may consider using this time to pay off higher interest rate debt or set aside the loan payments into savings to use for student loans at a later date. Or make a voluntary student loan payment towards the principal balance to save interest paid over the life of the loan.
- Another option is to decline the forbearance and switch to another repayment plan such as Standard, Graduated, or Extended (for those eligible with greater than $30,000 federal loans). This request can be completed through your servicer’s website. Or for those who wish to use an income-driven repayment plan, especially those who wish to continue making progress towards PSLF or IDR forgiveness, you may apply for another IDR plan such as Income-Based Repayment (IBR). The Department of Education is also trying to bring back the PAYE and ICR plans for new enrollment.
- Borrowers working towards PSLF may want to set aside their current monthly payments while in forbearance and request PSLF Buyback once you get to 120 months of qualifying employment. You will be given the option to buy back the months of forbearance equal to what your IDR payments would have been. Review the PSLF Buyback page for more details.
Q: How can I make payments more manageable if the SAVE plan doesn’t last?
A: Unless you had an income decrease and/or increase of family size, the other IDR plan(s) will calculate higher than the SAVE plan. The recommendation is to plan for that now, so you are not in a tough position to repay in 2025. Run the loan simulator to estimate payments. If another IDR plan does not calculate a manageable payment, another option would be to use the Extended 25-year repayment plan if you’ve borrowed more than $30,000. Or consolidate your federal student loans in order to permanently extend repayment up to 30 years (depending on the balance at consolidation). Those planning for PSLF or IDR forgiveness must be aware that the Extended and Consolidation Standard plans are not qualifying plans for forgiveness.
Q: What happens if PSLF goes away? Can anything be done now?
A: A PSLF repeal would need to be passed by Congress. Our recommendation is for borrowers who currently work for a government or not-for-profit employer and are planning for PSLF should submit a PSLF form even if you’ve only made one qualifying payment to be hopefully eligible for grandfathering in the chance that the PSLF program ends at some point.
Q: How can I pay off my student loan debt ASAP?
A: To pay off student loans in less than 10 years, you must make payments beyond your required Standard payment. Extra payments could be made monthly, annually, or whenever you can. You want to inform your servicer to apply the extra payment to the principal balance to maximize interest savings. If your account shows that it is paid ahead then you know they have not applied the payment to principal. For borrowers with an average $30,000 in student loans who owe roughly $300 per month and pay $200 extra ($500 monthly) will be out of debt in less than 4.5 years instead of 10 and save about $3,700 interest paid!
Tips for Borrowers to Stay on Track
- Take advantage of auto-debit to avoid late payments and benefit from interest rate reduction
- Review spending—check if there are areas to trim spending and redirect funds to student loan debt
- Re-evaluate repayment strategies at least annually
- Always review communication from servicer(s)
- Borrowers should look out for updates from the Department of Education and loan servicer website(s)
