Student Loan Payments Are Back
In March 2020, federal student loan borrowers were allowed to skip their monthly payments, and their interest rates would be 0%. Borrowers were unsure when this would be lifted but as of June 30th, 2023, President Biden has announced the final decisions on student loan forgiveness and repayment plans.
The Supreme Court has struck down Biden’s student loan forgiveness program. Justices determined President Biden had no authority under the HEROES Act to provide billions of dollars in student loan forgiveness. Starting September 1st, 2023, student loans will again begin to accrue interest, with the first payments due October 1st, 2023.
To help student loan borrowers who are now panicking, the Biden administration is offering two solutions to ease borrowers back into repayment plans:
SAVE Repayment Plan: The Saving on a Valuable Education (SAVE) Repayment plan has replaced the Revised Pay as You Earn (REPAYE) Plan. SAVE will base your student loan payment on your income. This will decrease the amount a borrower will have to pay from 10% to 5% of discretionary income, raise the amount of income that is considered non-discretionary, decrease the time frame for loan forgiveness, and not charge borrowers with unpaid monthly interest. For more details on this program, visit the white house’s briefing room statement.
Temporary payment “on-ramp”: This repayment plan will allow borrowers to gradually get into the swing of making payments without being punished for missed payments. The “on-ramp” is from September 1st, 2023- September 30th,2024, and will allow borrowers not to be considered for delinquency status, reported to creditors, placed in default, or referred to collection agencies.
If you have stopped making payments these last few years and are struggling to fit this debt payment back into your budget, consider analyzing your spending. Use the time between now and September to start keeping track of your expenses. Find the discretionary categories that are the highest and begin to cut back. The only way to create a budget is to identify where your money goes every month. To get a feeling of how it will affect your monthly cash flow in September, consider moving the future payment amount into a savings account to avoid spending it.
This could be a good time to consult with your financial advisor for more tips regarding consolidating your student loans, developing a repayment strategy, allocating excess cash flows to savings vs. debt, creating a budget, updating your financial plan, and so much more!
If you have questions and would like to talk with us further, please call us at 513-271-6777. For more THOR reading, click here to go to the Blogs and Market Updates section on our website.
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