Student Loan Repayment FAQs: What Borrowers Should Know
Updated on December 5, 2024
Overview
Student loan repayment has become even more challenging with the recent changes, including President Trump’s victory in the November 2024 election and his upcoming inauguration in January 2025.
Since the election, he’s pledged to dismantle the Education Department and has appointed Linda McMahon, who has no educational background, as the new Education Secretary.
This guide answers the most common questions borrowers have, from lowering payments to understanding forgiveness options.
1. Questions About The SAVE Plan
What is the SAVE Plan, and how does it impact student loan repayment?
The SAVE Plan is an Income-driven repayment option that calculates payments based on income and family size, often reducing payments to as little as $0 for low earners.
It aims to make student loan repayment more manageable by adjusting payments according to your financial situation.
How does the SAVE Plan calculate my monthly payment?
The SAVE Plan calculates your monthly payment as a percentage of your discretionary income, which is determined based on your income and family size.
Typically, payments are capped at a certain percentage to ensure affordability, and for some low-income earners, payments could be reduced to $0.
What happens to my repayment schedule under the SAVE Plan while the lawsuit is ongoing?
Borrowers enrolled in the SAVE Plan are currently placed in administrative forbearance as the lawsuit continues. During this time, no payments are required, and interest does not accrue.
But, this period does not count toward Public Service Loan Forgiveness or Income-driven repayment forgiveness.
Why are borrowers in the SAVE Plan placed in administrative forbearance, and should I continue making payments?
Borrowers enrolled in the SAVE Plan have been placed in administrative forbearance due to legal challenges that have temporarily blocked the implementation of this Income-driven repayment plan.
The forbearance is a result of a federal court injunction, which has prevented the U.S. Department of Education from billing borrowers. You may choose to continue making payments to reduce your balance faster, although it’s not required.
How long will I be in an administrative forbearance?
The forbearance began in late June 2024 and is anticipated to last until at least April 2025, depending on the resolution of the legal issues surrounding the SAVE Plan.
The minimum duration is set at six months, but it could extend beyond this timeframe, potentially lasting up to a year or more if legal disputes continue.
Related: SAVE Plan Forbearance
Can I change repayment plans from SAVE? If so, what are my options?
Yes, you can change repayment plans from the SAVE Plan. Your options include switching to the Standard, Graduated, Extended, or other income-driven plans like Income-Based Repayment or possibly the Pay As You Earn and Income-Contingent Repayment Plans. Contact your loan servicer to discuss eligibility and the best plan for your needs.
Use the Loan Simulator on the Federal Student Aid website to estimate your monthly payments.
Related: Student Loan Repayment Options
What repayment options are available for borrowers who applied for SAVE but are not yet enrolled?
Borrowers who applied for the SAVE Plan but are not yet enrolled can consider other available options, such as Income-driven repayment plans or the Standard, Extended, or Graduated plans until their enrollment is confirmed. Contact your loan servicer for further guidance.
Will interest be capitalized under the SAVE Plan during the lawsuit?
No, interest will not be capitalized under the SAVE Plan during the administrative forbearance caused by the ongoing lawsuit. Interest does not build up while payments are paused, helping to prevent your balance from increasing unnecessarily.
How does the lawsuit impact IDR recertification requirements?
Due to the ongoing lawsuit, the Department of Education has directed student loan servicers to extend the IDR recertification deadline to November 2, 2025.
Borrowers enrolled in SAVE will not need to recertify their income until then, and this change does not affect your current repayment status or monthly payment amount. Your servicer will provide reminders prior to the new recertification deadline.
2. Getting Started with Repayment Plans
Do I have to pick a repayment plan?
Yes, all federal student loan borrowers must select a repayment plan when their grace period ends. If you do not choose, you will automatically be placed in the Standard Repayment Plan. You can later switch to another plan if it better suits your financial situation.
How long is the grace period for student loan repayment?
Most federal student loans have a six-month grace period that starts after you graduate, leave school, or drop below half-time enrollment. During this time, no payments are required, but interest may still accrue, depending on the loan type.
Related: Guide to Student Loan Grace Periods
Where do I sign up for a different repayment plan?
You can sign up for a different repayment plan by visiting StudentAid.gov and logging into your account. You can also contact your loan servicer directly to discuss your options and initiate a repayment plan change.
What repayment plans qualify for student loan forgiveness programs?
Income-driven repayment plans, such as Income-Based Repayment, Income-Contingent Repayment, Pay As You Earn, and the Saving on a Valuable Education Plan qualify for federal student loan forgiveness programs.
These plans are typically eligible for forgiveness after 20-25 years of qualifying payments or after 10 years through programs like Public Service Loan Forgiveness.
3. Repayment Plan Options
What are the options for repayment plans?
Federal student loan borrowers can choose from several repayment options, including Standard, Graduated, Extended, and Income-Driven Repayment plans like IBR. As of December 2024, the Department of Education has reopened applications for PAYE and ICR, adding more repayment flexibility for borrowers while the SAVE Plan lawsuit continues.
Each plan offers different terms to fit your financial situation. Contact your loan servicer to explore your options.
Related: Is SAVE and IDR the Same?
What student loans are eligible for Income-driven repayment plans?
Most federal student loans are eligible for Income-driven repayment plans, including Direct Loans, Direct Consolidation Loans, Federal Family Education Loans (if consolidated), and Perkins Loans.
FFEL and Perkins loans typically receive better repayment options after consolidation, such as eligibility for more flexible IDR plans.
Are there repayment options specifically for Parent PLUS loans?
Yes, Parent PLUS loans can be repaid through the Standard, Graduated, or Extended plans. They are also eligible for Income-Contingent Repayment if consolidated into a Direct Consolidation Loan or the SAVE or IBR plans through the double consolidation loophole. This helps parents manage payments based on their income.
Related: Student Loan Repayment Options
What is the difference between federal and private student loans in terms of repayment?
Federal student loans offer more flexibility in repayment options, including Income-driven repayment and potential forgiveness, whereas private student loans typically have fewer repayment options and no forgiveness programs.
Federal loans also allow deferment or forbearance in times of financial hardship, which is less common with private loans.
Contact your private lender to find out what repayment options they offer.
Related:
4. Making Changes to Repayment Plans
Can I change repayment plans?
Yes, you can change your repayment plan at any time. Depending on your financial situation, you may switch to an Income-driven repayment plan or choose options like the Standard, Graduated, or Extended plans.
Related: How Do I Change My Student Loan Repayment Plan?
How does loan consolidation impact my repayment plan?
Consolidating your federal loans can simplify repayment by combining multiple loans into one. This may also provide access to additional repayment options, such as income-driven plans, but it could reset your progress toward forgiveness programs and result in paying more interest over time.
Related: Does Student Loan Consolidation Affect Your Credit Score?
Can I still qualify for forgiveness if I switch repayment plans?
Yes, switching repayment plans does not disqualify you from forgiveness as long as you stay in an eligible plan, such as an income-driven repayment plan. But, switching may affect how much time is required to achieve forgiveness, especially under PSLF or IDR forgiveness.
5. Managing Repayment and Costs
Do I have to include my spouse’s income for student loan repayment?
If you are married and file taxes jointly, your spouse’s income will be included when calculating your payments under Income-driven repayment plans. But if you do not have reasonable access to your spouse’s income—such as in cases of separation or limited financial communication—you may be able to provide a signed statement explaining your circumstances to exclude their income.
If you file separately, only your income is considered, although this may limit some repayment options.
Related: How Spousal Income Affects Income-Driven Repayment Plans
How do interest rates affect my repayment plan?
Interest rates determine how much extra you pay over time in addition to the principal. Fixed-rate loans have an interest rate that stays the same, while variable-rate loans can change.
Lower interest rates mean less cost overall, so understanding your interest type and rate is key for managing repayment.
Related:
What repayment plan is best for minimizing overall interest paid?
The Standard Repayment Plan generally minimizes interest paid over time, as it requires fixed monthly payments that fully repay the loan within 10 years.
Income-driven plans may result in more interest due to a longer repayment term, but they offer lower monthly payments for those who need it.
Can I make extra payments to pay off my loan faster?
Yes, you can make extra payments on your student loan without penalties. Making additional payments will reduce the principal balance faster, which in turn reduces the amount of interest you’ll pay over time. Be sure to specify that extra payments should go towards the principal.
Related
6. Payment Challenges
How do I postpone my student loan payments?
You can postpone your student loan payments by applying for deferment or forbearance. Deferment is generally available if you meet certain eligibility requirements, like being in school or experiencing economic hardship.
Forbearance is available if you are temporarily unable to make payments, though interest will continue to accrue during this time.
Related: Can’t Pay Your Loans? Consider Forbearance or Deferment
What happens if I miss a payment on my student loan?
If you miss a payment, your loan becomes delinquent, which may affect your credit score. After 90 days, it will be reported to the credit bureaus.
If you continue to miss payments for 270 days, your loan will go into default, which can result in wage garnishment and other serious financial consequences.
Related: Understanding Delinquency vs. Default in Student Loans
Bottom Line
If you want to learn more about repayment options, forgiveness programs, or how to tackle your student loan challenges, we’re here for you.
Our student loan lawyers can help make things clearer and guide you through your options. Book a call today or sign up for our newsletter to stay informed.
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