It was a stressful time to get student loans. Between the pay freezes and the courts challenging the legality of the Biden administration's SAVE repayment plan, there's a lot of uncertainty about what will happen next.
As a student loan expert with over 15 years of experience in the industry, I understand the uncertainty. I've seen my fair share of program changes, but I've never been through a period more complicated and tumultuous than the political tug of war we've seen in the past two years.
With so many factors up in the air, as it should approach your student loan repayment strategy?
You can't control the fate of debt relief programs or income repayment plans, but there are steps you can take to regain control of your student loans. Here are five things you can do right now—and one thing you shouldn't.
💻 View your student loan balance
Do you know how much you owe on your student loans in total? You may have an idea (or think you do), but it's important to check.
Many borrowers I've worked with are surprised to find they owe more than they originally borrowed when it's time to start repaying. This is because most loans, except for subsidized ones, start accruing from the moment of disbursement. Interest in arrears, which is not capitalized or added to your loan, is listed separately from the principal balance. To fully understand your loan balance, it's important to review your statements carefully.
If you know who your student loan servicer is, you can log into your online account to check your balance. If you are not sure, you can find out from logging into your Federal Student Aid account and visiting the My Help page.
Read more: 5 Ways to Pay Off Your Student Loans Even Faster
🗓️ Prepare to restart payments
If you are enrolled in the Valuable Education Savings Plan, your loans are in administrative resistance from this summer due to legal challenges to the plan. You have been unable to make payments and the interest rate is set to zero. This payment hold is temporary and I expect it to end soon.
If you haven't done so already, review your monthly budget to accommodate your student loan payments.
Read more: Stick with SAVE for Student Loan Forgiveness, Experts Say – With 4 Exceptions
💰 Compare all income-driven repayment options
If you're worried about your SAVE running out or want to adjust your budget to include your monthly loan payments, it's a good idea to explore all the repayment plans available. You can use it US Department of Education Loan Simulator estimate your payments and check eligibility for specific plans. This tool will allow you to explore available payment options based on your income.
Update: Department recently brought back pay as you earn and contingent income repayment optionstwo IDR plans that were previously phased out. You can now apply for them online (if you're eligible).
👩🏫 Check out the PSLF redemption program
On Public Service Loan Forgiveness Program offers debt forgiveness for teachers, nurses and other public service employees who work in a skilled job for 10 years and make 120 payments on their loans. If you're enrolled in SAVE and were close to reaching 120 total payments, a recent payment break may have delayed your forgiveness. In this case, you can benefit from PSLF Redemption Program.
The PSLF buyback program allows you to “buy back” months that your loans were pending during a filing period—but only if that brings you to a total of 120 payments.
For example, let's say you've already made 115 qualifying payments before your loan goes into service on the SAVE plan. You can apply for the PSLF buyout program to buy out five of the months your loans were in forbearance to reach the 120 payment requirement. You'll apply for the program online, and once approved, you'll have 90 days to pay off what you owe for the number of months you redeem. So if your monthly payment was $100, you would have to pay $500 to get forgiveness.
You'll also need to make sure you meet all other PSLF eligibility criteria, such as working for a qualified employer and the correct type of loan. If you think you're eligible and want to confirm the number of payments, you can find the appropriate payment amounts in your StudentAid.gov account.
Read more: More student loan forgiveness is on the way for PSLF borrowers. What's Next for Debt Relief?
🎓 Pay interest while you're still in school
If you're still in college, your student loans probably haven't gone into repayment yet. While it is difficult to predict what repayment options will be available in the future, there are proactive steps you can take now.
One recommendation is to pay off any interest that accrues while you're still in school. Even small contributions can help lower the total cost of your loans in the long run.
If your federal student loan has not yet gone into repayment, you will not be eligible to enroll in a repayment plan yet. Repayment begins six months after graduation or if your enrollment falls below half-time, unless you enroll in another program, such as a graduate degree, before the grace period ends.
❌ Don't count on forgiveness
Many borrowers have turned to income-driven repayment plans to lower their monthly payments and potentially qualify for student loan forgiveness. However, forgiveness is not guaranteed, especially as legal challenges continue to threaten the SAVE repayment plan. Programs like PSLF and forgiveness under the Income-Based Repayment Plan carry less risk because they would require changes or eliminations by Congressional action.
That said, it's always wise to plan to pay off your student loans in full, regardless of any current potential opportunities for forgiveness.