Loan Education

Student Loan Changes to Know

• Loan Forgiveness Pathways Expanded
  • Income-driven repayment plans can now limit monthly student loan bills at a set percentage of a student’s income and what they still owe after a set number of years gets forgiven
• IDR Account Adjustment, or Waiver
  • The Department of Education announced an IDR waiver known as the Public Service Loan Forgiveness (PSLF) that will allow millions of borrowers to come closer to student loan forgiveness
  • Students will need to sign up for an IDR plan to keep building credit towards loan forgiveness
• A New IDR Plan
  • The SAVE Repayment Plan replaced the Revised Pay As You Earn (REPAYE) Plan and modifies your payments based on a portion of your adjusted gross income (AGI)
  • Borrowers who have less than $12,000 in loans would see their remaining balance gone after 10 years of payments
• Student Loan Servicer Switches
  • The loan service companies that manage a student’s loan could change in the next few years
  • New contracts are planned to go live in 2024, but legacy contracts will last through December 2024 to help smooth the transition
• Other Key Student Loan Changes Underway
  • Fresh Start program for borrowers with delinquent or defaulted loans
  • Bankruptcy guidance that regulates the requirements for borrowers to discharge their student loans in bankruptcy
  • Breaking up consolidated spousal loans
    • Congress passed the Joint Consolidation Loan Separation Act, which will allow borrowers who previously consolidated their student loans with a spouse to separate them and access debt relief programs, like Public Service Loan Forgiveness

SAVE Repayment Plan

The Saving on a Valuable Education (SAVE) Plan is an income-driven repayment plan. This is one of the newest income driven plans (IDR), and the most recommended for student loan borrowers. This IDR plan comes with a variety of benefits because it takes into consideration the loan borrower's income and family size. Although the SAVE repayment plan is one of the best repayment options, it is only available for certain loans. If you were previously on the REPAYE Plan, then you were automatically switched to the SAVE Plan.

Eligibility For SAVE Repayment Plan

Current Benefits for Participants in SAVE Repayment Plan

• Increases income exemption from 150 percent to 225 percent.
• Lowers payments for borrowers, as it considers borrowers’ income and family size, making it possible for students to pay ZERO dollars while enrolled in school.
• Any income of $30,000 or below will be 0, or $60,000 for a family of four will be 0.
• Interest gets paid first, followed by the principal.

Benefits that will go into effect July 2024:

• Payments for undergraduate loans will be cut in half from 10% to 5%
• Possible forgiveness on student loans, depending on whether you meet certain requirements and if you always paid your loans on time. Requirements include having an original balance of $12,000, which would result in forgiveness after ten years of payments. Undergraduate loans are capped at 20 years, and graduate loans are capped at 25 years.
• Consolidating won’t erase forgiveness.
• Automatically receive credit towards forgiveness of specific periods of deferment and forbearance
  • Credit will include a period of deferment before July 1, 2024
  • Credit for forbearance is only applicable for forbearance received on or after July 1, 2024
• If borrowers are 75 days or more late on monthly payments, they are automatically enrolled in an IDR plan if they agree to allow the Office of Federal Student Aid (FSA) to access their tax information securely
  • They will be enrolled in the IDR plan that gives them the lowest payment amount

How to Apply to SAVE

Log in to StudentAid.gov using your FSA ID. Look for the IDR application and enter information about yourself, including personal information and income information. Review your plan options. Based on your information, you will be able to see which IDR plan is best for you. Select the option for your loan servicer to place you on the lowest monthly payment plan, which is typically the SAVE Plan. Submit your application once you have picked the best plan for your situation.

Fresh Start

All defaulted borrowers temporarily have Fresh Start benefits through at least September 2024. But you must use Fresh Start to get out of default to keep these benefits long-term.

Fresh Start is a one-time, temporary program offered by the U.S. Department of Education (ED) that provides special benefits to borrowers with delinquent federal student loans. Some of these benefits include:

• Access to federal student aid: You can apply for federal grants and loans again.
• Eligibility for other government loans: Your default status will stop being reported to CAIVRS so you are eligible to apply for other loans, such as mortgages.
• Stopped collections: Tax refunds and social security payments will not be withheld, wages will not be garnished and collection calls will end.
• Restored ability to rehabilitate loans: Fresh Start won’t count as your one chance for rehabilitation so you have another opportunity to rehabilitate a loan.
• Credit reporting changes: You can receive a status change that will prevent you from being negatively reported for delinquency.

Consequences of Not Repaying

A student’s loan becomes delinquent when they miss a payment. This can result in serious consequences after 90 days. If more than 270 days go by with no payment, the student’s loan goes into default, so the best option is to pay your loan on time. Consequences include:

Loan Acceleration

Your unpaid loan balance and any interest owed becomes immediately due.

Loss of Eligibility

You can no longer receive a deferment or forbearance and lose the ability to choose a repayment plan or receive additional federal student aid.

Credit Score

Your default status is reported to credit bureaus, which negatively impacts your credit score and affects your ability to buy a house or car.

Treasury Offset

Your federal benefits and tax refunds can be withheld and used to pay back your overdue debt.

Wage Garnishment

Your employer can be required to deduct a certain amount from your paycheck and send it to your loan holder to pay back your defaulted loan.

Additional fees

In addition to other charges related to the collection process, you can be charged court costs, collection fees, and attorney's fees.