Student loans have been confusing lately. Here's a guide to know where you stand
NEW YORK (AP) — Between collections resuming, courts blocking student loan programs and layoffs at the Education Department, borrowers might be confused about the status of their student loans.
Recently, the Education Department announced it would start involuntary collections on defaulted loans, meaning the roughly 5.3 million borrowers who are in default could have their wages garnished by the federal government.
At the center of the turmoil are the government's income-driven repayment plans, which reduce monthly payments for borrowers with lower incomes. Those plans were temporarily paused after a federal court blocked parts of the plans in February.
'There's so much confusion, they've made it very complicated,' said Natalia Abrams, president and founder of the Student Debt Crisis Center.
At the same time, some borrowers are struggling to get their loan servicers on the phone, making it hard to find answers to their questions, said Abrams.
If you're a student loan borrower, here are some answers to your questions.
What if I want to enroll in an income-driven repayment plan?
Applications for income-driven repayment plans are open, but they're taking longer than usual to process.
The applications were temporarily shut down earlier this year after a federal court in Missouri blocked the SAVE plan, a Biden administration plan that offered a faster path to loan forgiveness. The judge's order also blocked parts of other repayment plans, prompting the Education Department to pause income-driven applications entirely.
Amid pressure from advocates, the department reopened the applications on May 10.
Borrowers can apply for the following income-driven plans: the Income-Based Repayment Plan, the Pay as You Earn plan and the Income-Contingent Repayment plan.
Abrams expects applications will continue to be approved but at a slower pace than before the application pause.
Borrowers currently enrolled in an income-driven plan should be receiving notifications about recertification, said Khandice Lofton, counsel at the Student Borrower Protection Center. Recertification is required annually to update information on family size and income, and dates are different for each borrower.
What if I applied to the SAVE plan?
Borrowers enrolled in the SAVE plan have been placed in administrative forbearance while a legal challenge is resolved. That means they don't have to make payments and interest is not accruing. Time in forbearance normally does not count toward Public Service Loan Forgiveness.
The Education Department will notify borrowers with updates on payments and litigation.
"We don't know for sure when the SAVE forbearance is going to end," Abrams said.
While the future of the SAVE plan is decided in court, Abrams encourages borrowers to explore their eligibility for other income-driven repayment plans.
What if I want to consolidate my student loans?
The online application for loan consolidation is available again, at studentaid.gov/loan-consolidation. If you have multiple federal student loans, you can combine them into one with a fixed interest rate and a single monthly payment.
The consolidation process typically takes around 60 days to complete. You can only consolidate your loans once.
What if my loan was forgiven?
It would be difficult for the Education Department to reinstate loans that were canceled during President Joe Biden's administration. So far, it isn't believed to be happening, Abrams said.
What about the Public Service Loan Forgiveness program?
Nothing has changed yet.
President Donald Trump wants to change the Public Service Loan Forgiveness program to disqualify workers of nonprofit groups deemed to have engaged in 'improper' activities. He signed an executive order to that effect, but it has yet to be enforced.
Borrowers enrolled in PSLF should keep up with payments to make progress toward loan forgiveness, said Sarah Austin, policy analyst at the National Association of Student Financial Aid Administrators.
'There could be some changes coming in regards to PSLF but at this current time PSLF is still functioning and there is still loan forgiveness being processed under the PSLF provision,' said Austin.
An income-driven repayment tracker has disappeared from the federal student loan website for many borrowers, said Abrams. For keeping track of their status, Abrams is recommending that borrowers take screenshots of their payments.
What if I can't get a hold of my loan servicer?
Contacting your loan servicer is crucial to managing and understanding your student loans. Due to the large number of people trying to get answers or apply for programs, loan servicers are taking longer than usual to respond.
Abrams recommends borrowers prepare for long wait times.
'We've heard borrowers being in hold for three or four hours, then being transferred to a supervisor and then being hung up on, after all that wait time. It's incredibly frustrating,' Abrams said.
What can I do if I'm delinquent on my student loans?
If you're delinquent, try to get back on track. Borrowers who don't make their payments for 270 days go into default, which has severe consequences.
'If you're delinquent but have not defaulted yet, do whatever you can do to avoid going default,' said Kate Wood, a student loans expert at NerdWallet.
Borrowers who are delinquent on their student loans take a massive hit on their credit scores, which could drop 100 points or more, Wood said. A delinquency stays on your credit report for seven years.
Wood recommends contacting your servicer to ask for options, which can include forbearance, deferment or applying for an income-driven repayment plan.
What if I'm in default on my student loans?
The Education Department is recommending borrowers visit its Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan or sign up for loan rehabilitation.
Betsy Mayotte, president of The Institute for Student Loan Advisors, recommends loan rehabilitation.
Borrowers in default must ask their loan servicer to be placed into such a program. Typically, servicers ask for proof of income and expenses to calculate a payment amount. Once a borrower has paid on time for nine months in a row, they are taken out of default, Mayotte said. A loan rehabilitation can only be done once.
What happened to Fresh Start?
The Fresh Start program was a one-time temporary program that helped borrowers get out of default. This program ended Aug. 31, 2024.
___
The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Fox Sports
41 minutes ago
- Fox Sports
Hamlin undeterred by ruling siding with NASCAR in lawsuit filed by Jordan-owned 23XI and Front Row
Associated Press BROOKLYN, Mich. (AP) — Denny Hamlin is unfazed that a three-judge federal appellate panel vacated an injunction that required NASCAR to recognize 23XI, which he owns with Michael Jordan, and Front Row as chartered teams as part of an antitrust lawsuit. 'That's just such a small part of the entire litigation,' Hamlin said Saturday, a day ahead of the FireKeepers Casino 400. "I'm not deterred at all. We're in good shape.' Hamlin said Jordan feels the same way. 'He just remains very confident, just like I do,' Hamiln said. NASCAR has not commented on the latest ruling. 23XI and Front Row sued NASCAR late last year after refusing to sign new agreements on charter renewals. They asked for a temporary injunction that would recognize them as chartered teams for this season, but the Fourth Circuit Court of Appeals in Richmond, Virginia, on Thursday ruled in NASCAR's favor. 'We're looking at all options right now,' Hamlin said. The teams, each winless this year, said they needed the injunction because the current charter agreement prohibits them from suing NASCAR. 23XI also argued it would be harmed because Tyler Reddick's contract would have made him a free agent if the team could not guarantee him a charter-protected car. Hamlin insisted he's not worried about losing drivers because of the uncertainty. 'I'm not focused on that particularly right this second,' he said. Reddick, who was last year's regular-season champion and competed for the Cup title in November, enters the race Sunday at Michigan ranked sixth in the Cup Series standings. The charter system is similar to franchises in other sports, but the charters are revocable by NASCAR and have expiration dates. The six teams may have to compete as 'open' cars and would have to qualify on speed each week to make the race and would receive a fraction of the money. Without a charter, Hamlin said it would cost the teams 'tens of millions,' to run three cars. 'We're committed to run this season open if we have to,' he said. 'We're going to race and fulfill all of our commitments no matter what. We're here to race. Our team is going to be here for the long haul and we're confident of that.' The antitrust case isn't scheduled to be heard until December. NASCAR has not said what it would do with the six charters held by the two organizations if they are returned to the sanctioning body. There are 36 chartered cars for a 40-car field. 'We feel like facts were on our side,' Hamlin said. 'I think if you listen to the judges, even they mentioned that we might be in pretty good shape.' ___ AP auto racing: recommended in this topic
New York Post
2 hours ago
- New York Post
Why the Democratic NYC mayoral candidates have housing all wrong
The Democratic primary candidates for mayor all agree: the city faces a housing cost crisis. Brad Lander says it requires declaring a 'state of emergency.' Andrew Cuomo fears losing the 'soul of our city.' Scott Stringer insists 'the housing system is broken.' Unfortunately, the solutions which they — and especially Queens Assembly member Zohran Mamdani — offer will only make matters worse. They're ignoring the financial distress of private residential property owners, many operating at a loss, which could lead them simply to walk away from their buildings and bring New York back to the 1970s days of 'the Bronx is burning.' 6 Democratic mayoral candidates Andrew Cuomo and Zohran Mamdani (second from right) present arguments as Whitney Tilson and Michael Blake look on during a Democratic mayoral primary debate this past week. AP What's more, they overlook the damage and high costs of their preferred solution: still more subsidized, rent-regulated 'affordable housing.' By far the most potentially dangerous idea is the centerpiece of the Mamdani campaign: a freeze on all rent-stabilized rents. A rent freeze would be a quick way to drive those struggling small landlords out of business altogether. That's what the city's Rent Guidelines Board, which sets the rents for nearly a million rent-stabilized buildings, heard at its April 10 meeting. They were told by Mark Willis of the Furman Center on Real Estate at NYU that owners of rent-stabilized properties in The Bronx are, on average, losing a stunning $120 per month on every apartment, such that 200,000 units, concentrated in that borough, are under 'severe distress.' Their income has simply not kept up with rising costs — property taxes and utilities, whose prices are definitely not frozen. They've been hit hard, too, by the 2019 state Housing Stability and Tenant Protection Act, which limited any rent increases even for building improvements. Yet Mamdani asserts that 'our government works for the landlords.' 6 Brad Lander says NYC housing requires declaring a 'state of emergency.' AP 6 Mayor Eric Adams has recently acknowledged the tension between tenants' costs and building maintenance. Luiz Rampelotto/ZUMA / Ann Korchak, who heads the Small Property Owners of New York, disagrees. 'The costs of everything are rising. We're not in a vacuum. A freeze would crush us. You'd see foreclosures and abandonment.' A squeeze on operating income also decreases the value of a building, and makes banks unwilling to make loans for repairs. It's a vicious downward spiral — that's already left rent-stabilized buildings in bad shape. In its 2023 New York Housing and Vacancy Survey, the Census Bureau found that rent-regulated buildings had higher rates of rodents, leaks, mold, and heating breakdowns than market-rate units. These are the real housing emergencies. Eric Adams has at least acknowledged the tension between tenants' costs and building maintenance. He's defended a potential 1.75 to 4.75% rent increase approved by the RGB as 'protecting the quality of rent stabilized homes as costs continue to rise without overburdening tenants with unreasonable rent increases.' Instead, Democratic Socialist Mamdani proposes to 'unleash the public sector' and build 200,000 new units of public housing — despite the fact that NYCHA has struggled to maintain its existing 177 properties and faces a multi-billion-dollar repair backlog. Nationwide, public housing authorities, including NYCHA, are turning to the private sector to renovate and manage their buildings, not returning to Mamdani's Stalinist housing socialism. The debt financing he'd use would drain city funds from schools, parks, and police. Even less extreme Democrat proposals threaten to perpetuate housing problems. Cuomo, Lander, and Stringer all advocate building hundreds of thousands of costly new 'affordable' units, which, in exchange for property tax abatements, will be rent-stabilized. 6 Mamdani is proposing both a rent 'freeze' and the construction of hundreds of thousands of affordable housing units. Paul Martinka As those units age, they'll face the same revenue problems as older buildings in The Bronx. And they'll distort the city's housing market in a way that locks out talented newcomers the city needs. The proposed units are also costly, at least $500,000 a piece. Per Census data, turnover in rent-regulated units is half that of market-rate units, one of the reasons the city's overall turnover is 46% lower than the national average. 6 New public housing might sound logical, but NYC can barely manage and maintain the 117 existing public housing buildings already in operation. OLGA GINZBURG FOR THE NEW YORK POST That helps explain why the city's vacancy rate is so low and young adults must double and triple up in small apartments while Boomers age in place with empty bedrooms. Then there's 'inclusionary zoning' — a centerpiece of Council Speaker Adrienne Adams' housing policy. It actually drives up rents. Requiring that 20% of units be 'affordable' means that rents must be higher for the market-rate units for construction to make financial sense. 6 Supporters were seen holding signs in Bedford Stuyvesant during Zohran Mamdani's campaign rally. MediaPunch / BACKGRID Smart Democrats are backing what's been dubbed the 'abundance' agenda, which emphasizes the importance of building, not just redistribution. They should realize we need to encourage the construction of any and all housing. More supply will bring down the price of new housing and old, and help to meet demand. That would actually solve the housing crisis. Howard Husock is a senior fellow at the American Enterprise Institute.
3 hours ago
Trump's tariffs could pay for his tax cuts -- but it likely wouldn't be much of a bargain
WASHINGTON -- WASHINGTON (AP) — The tax cuts in President Donald Trump's One Big Beautiful Bill Act would likely gouge a hole in the federal budget. The president has a patch handy, though: his sweeping import taxes — tariffs. The Congressional Budget Office, the government's nonpartisan arbiter of tax and spending matters, says the One Big Beautiful Bill, passed by the House last month and now under consideration in the Senate, would increase federal budget deficits by $2.4 trillion over the next decade. That is because its tax cuts would drain the government's coffers faster than its spending cuts would save money. By bringing in revenue for the Treasury, on the other hand, the tariffs that Trump announced through May 13 — including his so-called reciprocal levies of up to 50% on countries with which the United States has a trade deficit — would offset the budget impact of the tax-cut bill and reduce deficits over the next decade by $2.5 trillion. So it's basically a wash. That's the budget math anyway. The real answer is more complicated. Actually using tariffs to finance a big chunk of the federal government would be a painful and perilous undertaking, budget wonks say. 'It's a very dangerous way to try to raise revenue,' said Kent Smetters of the University of Pennsylvania's Penn Wharton Budget Model, who served in President George W. Bush's Treasury Department. Trump has long advocated tariffs as an economic elixir. He says they can protect American industries, bring factories back to the United States, give him leverage to win concessions over foreign governments — and raise a lot of money. He's even suggested that they could replace the federal income tax, which now brings in about half of federal revenue. 'It's possible we'll do a complete tax cut,'' he told reporters in April. 'I think the tariffs will be enough to cut all of the income tax.'' Economists and budget analysts do not share the president's enthusiasm for using tariffs to finance the government or to replace other taxes. 'It's a really bad trade,'' said Erica York, the Tax Foundation's vice president of federal tax policy. 'It's perhaps the dumbest tax reform you could design.'' For one thing, Trump's tariffs are an unstable source of revenue. He bypassed Congress and imposed his biggest import tax hikes through executive orders. That means a future president could simply reverse them. 'Or political whims in Congress could change, and they could decide, 'Hey, we're going revoke this authority because we don't think it's a good thing that the president can just unilaterally impose a $2 trillion tax hike,' '' York said. Or the courts could kill his tariffs before Congress or future presidents do. A federal court in New York has already struck down the centerpiece of his tariff program — the reciprocal and other levies he announced on what he called 'Liberation Day'' April 2 — saying he'd overstepped his authority. An appeals court has allowed the government to keep collecting the levies while the legal challenge winds its way through the court system. Economists also say that tariffs damage the economy. They are a tax on foreign products, paid by importers in the United States and usually passed along to their customers via higher prices. They raise costs for U.S. manufacturers that rely on imported raw materials, components and equipment, making them less competitive than foreign rivals that don't have to pay Trump's tariffs. Tariffs also invite retaliatory taxes on U.S. exports by foreign countries. Indeed, the European Union this week threatened 'countermeasures'' against Trump's unexpected move to raise his tariff on foreign steel and aluminum to 50%. 'You're not just getting the effect of a tax on the U.S. economy,' York said. 'You're also getting the effect of foreign taxes on U.S. exports.'' She said the tariffs will basically wipe out all economic benefits from the One Big Beautiful Bill's tax cuts. Smetters at the Penn Wharton Budget Model said that tariffs also isolate the United States and discourage foreigners from investing in its economy. Foreigners see U.S. Treasurys as a super-safe investment and now own about 30% of the federal government's debt. If they cut back, the federal government would have to pay higher interest rates on Treasury debt to attract a smaller number of potential investors domestically. Higher borrowing costs and reduced investment would wallop the economy, making tariffs the most economically destructive tax available, Smetters said — more than twice as costly in reduced economic growth and wages as what he sees as the next-most damaging: the tax on corporate earnings. Tariffs also hit the poor hardest. They end up being a tax on consumers, and the poor spend more of their income than wealthier people do. Even without the tariffs, the One Big Beautiful Bill slams the poorest because it makes deep cuts to federal food programs and to Medicaid, which provides health care to low-income Americans. After the bill's tax and spending cuts, an analysis by the Penn Wharton Budget Model found, the poorest fifth of American households earning less than $17,000 a year would see their incomes drop by $820 next year. The richest 0.1% earning more than $4.3 million a year would come out ahead by $390,070 in 2026. 'If you layer a regressive tax increase like tariffs on top of that, you make a lot of low- and middle-income households substantially worse off,'' said the Tax Foundation's York. Overall, she said, tariffs are 'a very unreliable source of revenue for the legal reasons, the political reasons as well as the economic reasons. They're a very, very inefficient way to raise revenue. If you raise a dollar of a revenue with tariffs, that's going to cause a lot more economic harm than raising revenue any other way.''
