Each month I send readers of this site a monthly update with the latest news and developments in the world of student loans.
The following is the contents of the August email. If you wish to sign up to receive future editions of the monthly update, you can subscribe here.
New Federal Repayment Plan
The new SAVE plan will be the best IDR plan for most federal student loan borrowers.
It technically replaces the current REPAYE plan and is being released in two phases. Some provisions will be immediately available, and others go live July 1, 2024.
Budgeting for the Restart
I’m troubled by this report for a couple of reasons.
For starters, I hope it means that many of the survey participants don’t understand SAVE or IDR repayment.
Second, and more concerning, many other borrowers may read these headlines and conclude that they have no hope and default is inevitable.
I hope Student Loan Sherpa readers don’t feel this sense of hopelessness. Managing federal debt is brutal and frustrating, but default is often avoidable.
IDR Adjustment Update
Last year, the Biden administration announced a significant update to IDR payment counts.
This update will move many borrowers much closer to forgiveness.
For borrowers with FFEL or Perkins loans, consolidation before 12/31/23 is necessary to qualify.
Additionally, if your loans have different IDR counts, you may also want to consolidate. For example, if you attended college, left for several years, and then returned for graduate school, combining your debt may result in a higher IDR count.
Sadly, there is a lawsuit to challenge aspects of the one-time adjustment. I’m skeptical that the lawsuit will impact anything, but I can’t say for certain.
Help for Struggling Borrowers
For borrowers that have struggled in the past with their student debt, a couple of new resources are worth noting.
The first one to highlight is the Fresh Start program. If your loans defaulted before the payment pause started, Fresh Start is an excellent option to get started on IDR and clean up your credit report. Fresh Start will be a much better choice than rehabilitating or consolidating to address a default.
The other big change is the new bankruptcy policy. Historically, bankruptcy wasn’t really an option for federal student loan borrowers outside of the most extreme cases. Today, things are much different. Bankruptcy now provides a meaningful opportunity for borrowers overwhelmed by their federal debt.
Tip of the Month
Log in to your servicer account and update your contact information.
This tip may not seem particularly clever or helpful, but it is critical. Many borrowers have new servicers, and others have moved since 2020.
If you miss an important letter, email, or deadline, you won’t get any slack because it was sent to your old home or email address.
If you are unsure about who currently services your loans, it’s pretty easy to track down that information.
Did you know?
Working for a PSLF employer for ten years is insufficient to qualify for forgiveness.
You must be employed by an eligible employer at the time you apply for forgiveness and at the time it is granted.If PSLF is in your future, be sure not to leave your job too soon.