After a pause lasting three and a half years, approximately 44 million individuals in the United States who carry student loan debt will soon be resuming payments on their loans. Here are some common questions and answers for borrowers and their families.
When does interest resume?
Student loan interest is scheduled to begin accruing this Friday, September 1st.
When is my first payment due?
The first payment will be due in October. Loan servicers are issuing notifications 21 days in advance of the initial payment date. It’s important for those managing this debt to verify whether their loan servicer remains the same, as there have been several changes from the time this situation first arose during the pandemic until now.
Are there other student loan forgiveness programs?
Yes, there are several options.
Public Service Loan Forgiveness (PSLF): This option is relevant for borrowers who work full-time for public service employers, non-profit organizations, or government agencies for a span of 10 years, while making 120 payments under a qualifying plan.
Teacher Loan Forgiveness: his program extends loan forgiveness of up to $17,500 to teachers who serve five consecutive years in low-income schools or education agencies.
Income-Driven Repayment (IDR) Discharge:This avenue will lower payments based on your discretionary income, spanning a new loan term of either 20 or 25 years. If a loan balance persists at the conclusion of the loan term, the government will forgive the remaining amount. Unlike the prior two options, IDR plans are subject to federal income taxes based on the forgiven amount at the end of the loan.
SAVE Repayment Plan:This option is an alternative IDR plan that employs an alternate calculation for discretionary income, resulting in reduced payments. In IDR plans, discretionary income is calculated as your earnings minus 150% of the federal poverty guideline for your household size. However, under the SAVE plan, this calculation shifts to your earnings minus 225% of the federal poverty guideline. Additionally, it permits loan forgiveness in as little as 10 years, as opposed to the 20 or 25 years in traditional IDR plans.
Is it possible my student debt is still forgiven?
In June, the Supreme Court shot down President Biden’s student debt relief proposal. Shortly after this announcement, the President directed the Education Secretary to initiate a process under the Higher Education Act, aiming to potentially waive or release loans under specific circumstances. While there is a chance that this initiative could succeed, it’s anticipated to be an extended and legally contested process. In our opinion, if you’re a borrower weighing your potential choices, we would not rely on this occurring.
Presented by the Financial Planning Committee of Lake Street, an SEC Registered Investment Adviser
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