Repayment Options for Student-Loan Borrowers
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Here's your Money Briefing for Thursday, February 8th. I'm J.R. Whelan for The Wall Street Journal. Widespread student loan forgiveness is unlikely to become a reality anytime soon, but there are still some relief options for the more than 40 million borrowers on the hook for monthly payments.
People had been anticipating that payments would restart, but the government also wanted to give them an opportunity that if they were still struggling to pay back their loans, they wouldn't all of a sudden be declared delinquent or reported to credit rating firms or placed in default, etc.
We'll talk to Wall Street Journal contributor Cheryl Winokur-Monk after the break.
Student loan borrowers have several options that can help them pay down their balances. Wall Street Journal contributor Cheryl Winokur-Monk joins me to review some of them. Cheryl, after the pandemic-era forbearance ended, there was a similar plan that gave borrowers some relief. Is that still available?
What repayment options exist for the 40+ million student-loan borrowers?
Yes, actually, there are several plans called income-driven repayment plans that help borrowers repay their loans based on their income and family size. There's a new plan, which is what you're referring to, and that's called the SAVE plan, and that has several advantages over the other plans if you qualify. Okay.
Who are these plans available for?
Many borrowers will be able to use the SAVE plan. And for those who do, they'll see many benefits. The best thing to do really is to go to studentaid.gov and use the student loan simulator to simulate your payments and to see which plan you'd be better off on. It's hard to say exactly who would be better off on what plan. It really is going to depend on your income level and family size. But the federal government has an amazing simulator program that allows you to do it with real numbers.
What about people with Parent PLUS loans?
So it's a little more complicated, but they also can go onto the simulator and see which repayment plans may be better for them. There is an income-driven repayment plan for them, and there is a way to be able to use SAVE, but there's a special process that people with Parent PLUS loans have to go through. That process is known as double consolidation. And that option won't be available after July 1st, 2025. But you can do it. It's just it's a little bit complicated. You just want to make sure you do it correctly.
The government also announced what it called an on-ramp period for people struggling to pay back their loans. What is that and when does it expire?
So because people had been anticipating that payments would restart, but the government also wanted to give them an opportunity that if they were still struggling to pay back their loans, they wouldn't all of a sudden be declared delinquent or reported to credit rating firms or placed in default, etc. The so-called on-ramp period ends September 30th. And until then, financially vulnerable borrowers, if they miss their monthly payments, they're not going to be deemed delinquent or reported to credit rating firms, for example. It doesn't mean you shouldn't pay if you can, but if you're struggling, there is a little bit of a buffer for you.
But what if that date comes and people are still worried about paying their student loans?
Even before the grace period ends, you really need to call your servicer if you feel like you're going to have a hard time repaying your loans. The first step before you even do that is really, I can't stress this enough, go to studentaid.gov and click on the link, the Federal Student Aid Simulator. This will help you figure out what payment plan could be right for you. If you can get on an income-driven repayment plan, you could have zero payments per month. And so even if you're struggling now, maybe you're on the wrong repayment plan. So that's why I say even before that on-ramp period ends, you should go to the government website today to figure out if you could qualify for lower payments. And maybe you won't even have to worry about not being able to repay your loans when the on-ramp period expires.
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