Latest news with #SAVEplan
CNN
36 minutes ago
- Business
- CNN
As student loan interest restart for millions under SAVE plan, leaving some borrowers ‘crushed'
Student life Household debt Personal financeFacebookTweetLink Follow Andrea Murzello has a doctorate in pharmacy and a stable job at a nonprofit. But she says she can't afford to grow her family — not under the Trump administration's latest student loan policy shift. She's one of nearly 8 million borrowers who will see their loan balances start increasing again on August 1. Earlier this month, the Department of Education announced it would resume applying interest to loans held by borrowers enrolled in the Saving on a Valuable Education (SAVE) plan, an income-driven repayment plan introduced under the Biden administration that had helped borrowers struggling to keep up with high interest loans. Murzello, 34, graduated from pharmacy school in 2016 with over $200,000 in student loan debt. She initially enrolled in a student loan repayment program for public servants, making monthly payments of around $1,000. In 2023, she switched to SAVE because it cut her monthly payments to about $400. She was even able to stop these payments without adverse consequences last year, when a court injunction put a temporary pause on the SAVE plan. Before SAVE, Murzello couldn't make a dent in her balance despite making monthly payments because of the rising interest, she said. 'Instead of having any debt going downwards, I was seeing the opposite occur, because I just wasn't able to pay enough to make any impact,' she said. 'Entering the SAVE program was very beneficial for me and my family.' She had hoped SAVE would offer long-term stability. But now, she and her husband are postponing plans for a second child. 'I think the frustration comes from the massive amount of changes that are occurring,' she said. The SAVE plan launched in August 2023. It aimed to reduce monthly payments based on income and family size, prevent interest from ballooning, and accelerate loan forgiveness for some low-income borrowers. 'These are people or individual families that have low income that were really relying on that that zero dollar for payment, that no longer are going to have that option,' said Roxanne Garza, director of higher education at EdTrust, a left-leaning education advocacy group. But SAVE faced legal challenges from the start. Last year, two federal judges in Kansas and Missouri blocked key parts of the program, arguing that the Biden administration overstepped its authority by enacting debt relief without Congressional approval. Following the court decision, SAVE borrowers were placed in no-interest forbearance, with payments paused and balances frozen since last summer. But starting August 1st, interest will start to accrue again. Borrowers will still be able to be granted forbearance — meaning putting a delay on their monthly payments — but interest will now be applied each month. The Department of Education hasn't said when this will end. Calling SAVE an 'illegal' plan in a press release, Education Secretary Linda McMahon urged borrowers to switch to a 'legally compliant repayment plan' instead. Student loan experts say this move causes more confusion for borrowers who are already bogged down in trying to navigate the rapidly changing landscape of student loans. Besides the change to SAVE, more extensive shifts to student loans were passed in the Trump administration's domestic policy bill, the One Big Beautiful Bill. 'Even diligent people grow weary of understanding what their situation is and their options,' said Ken Ruggiero, founder and CEO of private loan provider Ascent. And Garza, of EdTrust, warned that it could be a long wait before getting clarity from the Department of Education. 'I'm not sure how easy it will be to get your questions answered or how long it will take to actually have your application process to switch into a different plan, especially now that you will likely see like a surge of people acting because of the interest accrual coming back online,' Garza adds. The Department already has a backlog of roughly 1.5 million applications from borrowers seeking to switch into different income-driven repayment plans, CNN has previously reported. Experts encourage borrowers who are on the SAVE plan to be as proactive as possible to understand their options and figure if another plan may be better. The confusion over student loans is creating broader societal issues. Nearly three quarters (71%) of borrowers surveyed in a national poll have said that student loan debt has delayed a major life event, such as buying a home, having children, or getting married, according to the Gallup-Lumina Foundation's Cost of College report released last spring. And in some important sectors, such as medicine, it is contributing to a looming crisis. According to the Association of American Medical Colleges, the US is expected to face a deficit of up to 40,400 primary care physicians by 2036 — an expected shortfall the group has attributed in part to the steep cost of medical education. Bronte Remsik, a 31-year-old medical resident, graduated from Campbell University in May 2024 with close to $300,000 in student loans. She had worked with financial counselors and immediately applied for the SAVE plan. But her application was never processed. Her loan servicer advised her to 'wait it out.' She couldn't apply for a different repayment plan, as it would cancel out her SAVE application. With a growing federal backlog and no clear guidance, she feels stuck in limbo. 'All of the people that I'm reaching out to who are supposed to help me also don't know what to do,' she said. 'And now I'm being told that the interest is going to start accruing on my loans when I'm not even able to enroll in a payment program.' 'The financial walls just feel like they're crushing down around me when I thought graduating from medical school was the big win,' she said.
CNN
an hour ago
- Business
- CNN
As student loan interest restart for millions under SAVE plan, leaving some borrowers ‘crushed'
Andrea Murzello has a doctorate in pharmacy and a stable job at a nonprofit. But she says she can't afford to grow her family — not under the Trump administration's latest student loan policy shift. She's one of nearly 8 million borrowers who will see their loan balances start increasing again on August 1. Earlier this month, the Department of Education announced it would resume applying interest to loans held by borrowers enrolled in the Saving on a Valuable Education (SAVE) plan, an income-driven repayment plan introduced under the Biden administration that had helped borrowers struggling to keep up with high interest loans. Murzello, 34, graduated from pharmacy school in 2016 with over $200,000 in student loan debt. She initially enrolled in a student loan repayment program for public servants, making monthly payments of around $1,000. In 2023, she switched to SAVE because it cut her monthly payments to about $400. She was even able to stop these payments without adverse consequences last year, when a court injunction put a temporary pause on the SAVE plan. Before SAVE, Murzello couldn't make a dent in her balance despite making monthly payments because of the rising interest, she said. 'Instead of having any debt going downwards, I was seeing the opposite occur, because I just wasn't able to pay enough to make any impact,' she said. 'Entering the SAVE program was very beneficial for me and my family.' She had hoped SAVE would offer long-term stability. But now, she and her husband are postponing plans for a second child. 'I think the frustration comes from the massive amount of changes that are occurring,' she said. The SAVE plan launched in August 2023. It aimed to reduce monthly payments based on income and family size, prevent interest from ballooning, and accelerate loan forgiveness for some low-income borrowers. 'These are people or individual families that have low income that were really relying on that that zero dollar for payment, that no longer are going to have that option,' said Roxanne Garza, director of higher education at EdTrust, a left-leaning education advocacy group. But SAVE faced legal challenges from the start. Last year, two federal judges in Kansas and Missouri blocked key parts of the program, arguing that the Biden administration overstepped its authority by enacting debt relief without Congressional approval. Following the court decision, SAVE borrowers were placed in no-interest forbearance, with payments paused and balances frozen since last summer. But starting August 1st, interest will start to accrue again. Borrowers will still be able to be granted forbearance — meaning putting a delay on their monthly payments — but interest will now be applied each month. The Department of Education hasn't said when this will end. Calling SAVE an 'illegal' plan in a press release, Education Secretary Linda McMahon urged borrowers to switch to a 'legally compliant repayment plan' instead. Student loan experts say this move causes more confusion for borrowers who are already bogged down in trying to navigate the rapidly changing landscape of student loans. Besides the change to SAVE, more extensive shifts to student loans were passed in the Trump administration's domestic policy bill, the One Big Beautiful Bill. 'Even diligent people grow weary of understanding what their situation is and their options,' said Ken Ruggiero, founder and CEO of private loan provider Ascent. And Garza, of EdTrust, warned that it could be a long wait before getting clarity from the Department of Education. 'I'm not sure how easy it will be to get your questions answered or how long it will take to actually have your application process to switch into a different plan, especially now that you will likely see like a surge of people acting because of the interest accrual coming back online,' Garza adds. The Department already has a backlog of roughly 1.5 million applications from borrowers seeking to switch into different income-driven repayment plans, CNN has previously reported. Experts encourage borrowers who are on the SAVE plan to be as proactive as possible to understand their options and figure if another plan may be better. The confusion over student loans is creating broader societal issues. Nearly three quarters (71%) of borrowers surveyed in a national poll have said that student loan debt has delayed a major life event, such as buying a home, having children, or getting married, according to the Gallup-Lumina Foundation's Cost of College report released last spring. And in some important sectors, such as medicine, it is contributing to a looming crisis. According to the Association of American Medical Colleges, the US is expected to face a deficit of up to 40,400 primary care physicians by 2036 — an expected shortfall the group has attributed in part to the steep cost of medical education. Bronte Remsik, a 31-year-old medical resident, graduated from Campbell University in May 2024 with close to $300,000 in student loans. She had worked with financial counselors and immediately applied for the SAVE plan. But her application was never processed. Her loan servicer advised her to 'wait it out.' She couldn't apply for a different repayment plan, as it would cancel out her SAVE application. With a growing federal backlog and no clear guidance, she feels stuck in limbo. 'All of the people that I'm reaching out to who are supposed to help me also don't know what to do,' she said. 'And now I'm being told that the interest is going to start accruing on my loans when I'm not even able to enroll in a payment program.' 'The financial walls just feel like they're crushing down around me when I thought graduating from medical school was the big win,' she said.
CNET
2 days ago
- Business
- CNET
SAVE Student Loan Borrowers, Interest Restarts on Friday. Should You Move to IBR Now?
Interest will restart for SAVE borrowers whose loans remain in a general forbearance on Aug. 1. Viva Tung/CNET If you're a student loan borrower enrolled in SAVE, you have until the end of the week before interest will begin accruing on your loans. The change doesn't mean you have to switch repayment plans yet, but it could be a good time to make a plan. Earlier this month, the Department of Education announced interest would resume for the nearly 8 million borrowers on the Saving on a Valuable Education plan, beginning Aug. 1. Monthly payments, however, still remain on hold in a general forbearance. There's only a few days left to decide if you want to move onto another income-driven repayment plan or continue to stay on SAVE. "It's crucial for borrowers to act based on their own personal situation," said Elaine Rubin, a student loan policy expert and director of corporate communications at Edvisors. "A borrower who chooses to stay in the forbearance or who is waiting for their payment plan application to be processed will have their loan remain in good standing." The SAVE repayment plan was shot down by the courts earlier this year, but borrowers' payments are expected to remain on hold until mid-2026 unless an upcoming court decision speeds up the timeline. If you're not sure about the best move for your loans, here's what experts suggest and the one thing you should do if you leave your loans in SAVE. Do PSLF borrowers in SAVE need to do anything before Aug. 1? If you're working toward Public Service Loan Forgiveness and are enrolled in SAVE, you can either stay in forbearance or switch to another repayment plan. "For borrowers pursuing PSLF, this won't mean very much," said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors. "They can still either ride out the forbearance and plan on using what's called buy-back to get the months to count for PSLF purposes or switch plans now to another qualifying plan." If you decide to stay in forbearance, you'll be able to claim the months your loans were on hold using a process called PSLF buy-back. This allows you to pay for the months when your loans were in an administrative forbearance, to help you reach 120 on-time payments to receive forgiveness. If you decide to move your loans to another repayment plan, your payments will restart after your application is processed. Application processing is experiencing delays, and experts say not to expect your first payment under the new plan for a month or two, at the soonest. Although your payment may be higher on another income-driven repayment like IBR, this monthly amount would be the same amount you'd be charged when you went to "buy back" those months. Either way, you'll pay roughly the same amount. What should you do if you're pursuing income-driven repayment forgiveness? Although you're not required to switch repayment plans by August, you should review your options to see what the best fit is for your financial situation. "For those pursuing income-driven plan forgiveness, they should strongly consider switching to another income-driven plan," said Mayotte. She noted that there's no buy-back option for IDR forgiveness, and the months that your loans are sitting in forgiveness won't count toward your total number of payments. Waiting would drag out your forgiveness timeline. You can look at your other income-driven repayment plan options using the Federal Student Aid loan simulator. When you're ready to switch to a new plan, you can apply to change your IDR on the FSA website. You can also continue to stay in SAVE until the forbearance period ends and you're placed on another repayment plan. You can pay the monthly interest that accrues, but those payments won't count towards forgiveness, Mayonette said. Should you switch repayment plans if you don't qualify for forgiveness? If you don't qualify for student loan forgiveness options, you can switch to another IDR or continue to wait out the forbearance. Either way, you should count on making payments again soon -- whether that's a new monthly payment or paying off the interest that accrues each month during the forbearance period. Since there are a few weeks left before interest charges start again, Mayonette suggests making larger lump sum payments while your interest is frozen, if you can. Do all SAVE borrowers qualify for Income-Based Repayment? SAVE borrowers should qualify for another income-driven repayment plan. However, it's possible you may not right now. "The Big Beautiful Bill has eliminated the requirement of a partial financial hardship for IBR," said Rubin. "However, the forms and the Loan Simulator have yet to be updated. It may take the department and the servicers some time to update their systems and information." In the meantime, look for the most affordable repayment option available, or you can choose to keep your loans in forbearance. Read more: SAVE Borrowers Encouraged to Move to IBR Even Though Forgiveness Options Are Paused. Here's What's Going On Will my payments increase if I move my loans from SAVE? Yes, most borrowers should expect higher payments when moving their loans from SAVE. Although income-driven repayment plans are generally more affordable than the standard repayment plan, SAVE was the most affordable student loan repayment plan to date. Many low-income borrowers had $0 or near $0 payments each month. CNET estimated that a single borrower earning $60,000 a year with $30,000 in student loan debt would have paid approximately $217 on SAVE. Switching to another income-driven repayment plan like IBR could increase their monthly payment by nearly $100. You can use the Federal Student Aid Loan Simulator to estimate what your new monthly payment will look like. If I switch payment plans, when will I receive my first bill? If you switch to IBR or another repayment plan, that doesn't mean your first monthly payment will hit in August. "The US Department of Education still has a backlog in processing the forms to request a change of repayment plan, so they might not have to make payments for a few months until their request to switch repayment plans is processed," said Mark Kantrowitz, a financial aid and student loan expert. Still, it's smart to prepare for repayment right away, just in case. My new student loan payment is too high. What can I do? Many borrowers will see higher payments on another payment plan, even an income-driven repayment plan like IBR. If you need more time to prepare for repayment, you can also wait to switch repayment plans until the forbearance period ends. "Borrowers will have the option to stay in the general forbearance, for now," said Rubin. "However, borrowers who decide to stay in the forbearance need to stay informed. The Department has indicated that borrowers will remain in the forbearance until the legal challenges are resolved, or until the student loan servicer can send them a bill for the proper repayment amount." If you need more time to prepare for repayment, leaving your loans on hold can give you extra months to plan. During this time, you should consider making interest-payments, if possible, to prevent your account balance from rising. "There are no prepayment penalties on federal and private student loans, so nothing stops you from making interest-only payments," said Kantrowitz. "You can manually calculate the interest on your loans and make a prepayment in that amount each month." While the forbearance period won't last forever, it is currently expected to last until mid-2026. However, an upcoming court case could change that and end forbearance sooner. If you're facing financial distress, you might consider economic hardship deferment, unemployment deferment or general forbearance, said Kantrowitz. But he warned that interest may continue to accrue, which could dig you into a deeper hole. You can reach out to your servicer or review financial hardship options on the FSA website.
Forbes
3 days ago
- Business
- Forbes
Student Loans: Interest For SAVE Plans Resumes This Week—What To Know
The Trump administration will resume charging interest this week on student loans under the Biden-era SAVE plan, which have been on hold while the plan's tied up in court—potentially costing nearly 8 million borrowers an extra $3,500 per year in interest. Education Secretary Linda McMahon testifies during a Senate hearing on June 3 in Washington, DC. Getty Images The Trump administration will begin charging interest on the loans starting Aug. 1, following a July 9 announcement by the Education Department, though borrowers will not have to resume making payments until the forbearance period ends. The SAVE plan was established by the Biden administration and offers borrowers a more flexible and affordable way to pay back their loans, but borrowers enrolled in the plan have had their loans in forbearance since last summer, after federal courts blocked loan forgiveness under the plan in response to a lawsuit from GOP state attorneys general. Borrowers previously did not have any interest accrue on their loans while the legal case proceeds, and it's unclear how much longer the litigation will take to play out, though the Education Department previously said borrowers should not expect to resume payments until December at the earliest. The change will affect approximately 7.84 million borrowers with loans under the SAVE plan that are now in forbearance, according to the Education Department, with the Student Borrower Protection Center (SBPC) projecting in an analysis that resuming interest will result in an extra $27 million in combined accrued interest over a 12-month period. The average borrower enrolled in the SAVE plan will be charged approximately $3,500 more in interest per year, or approximately $300 per month, versus if the interest accrual had remained on hold, the SBPC predicted. The Department of Education argued the change regarding interest accrual is necessary because of a February court ruling that broadened the scope of the court order pausing the SAVE plan, claiming the ruling blocked the provision of the law the government used to justify not charging any interest. The Trump administration recommends that borrowers whose loans are in forbearance under the SAVE plan should try to move their loans to a different income-driven repayment plan. It's unclear how long that would take, however, as while the Trump administration is processing applications for those plans, there's also been a significant backlog when it comes to application processing. The Education Department said in a June court filing that 1.5 million applications for income-driven repayment plans had still yet to be processed, meaning that while borrowers can try to change to another plan, it may take a while to do so. The agency said in July that any borrowers who have previously submitted an application for income-driven repayment and selected the Income-Based Repayment, Pay As You Earn, or Income-Contingent Repayment plans will not have to submit a new application. Borrowers who remain enrolled in the SAVE plan are still not required to resume making payments on their loans, but the Education Department notes they can make interest-only payments to their loans if desired. How Does This Affect Student Loan Forgiveness? The months spent in forbearance under the SAVE Plan will not count toward loan forgiveness through the Public Service Loan Forgiveness or Income-Driven Repayment programs, which require borrowers to make payments for a certain number of months before their remaining loan balance is forgiven. That's still the case even once interest starts accruing on Aug. 1, according to the Education Department, so borrowers will have to switch plans in order to start having months count toward their forgiveness again. Borrowers eligible for Public Service Loan Forgiveness may also be eligible to 'buy back' some months of their payment history in order to make them count toward forgiveness, if doing so would complete their total number of qualifying payments for forgiveness. In addition to the court order stopping payments under the SAVE Plan, court orders are also now blocking the government from providing any loan forgiveness under the SAVE Plan, Pay As You Earn Repayment Plan (PAYE) and Income-Contingent Repayment Plan (ICR). Forgiveness is still allowed under the Income-Based Repayment Plan (IBR), and the Education Department notes payments made under the SAVE, PAYE and ICR plans will count toward forgiveness after borrowers switch over to an IBR plan. That being said, forgiveness under IBR plans is on hold right now while the Education Department updates its systems. The SBPC disagrees with the government's claim that it was legally required to start charging interest again, arguing in its analysis that the February court ruling does not include any 'discussion of the legality of the Department's temporary, interest-free SAVE forbearance.' 'Despite representations by the U.S. Department of Education … to the contrary, no federal or state court—including 8th Circuit Court of Appeals—has issued an order instructing the Department to resume charging these borrowers interest or calling into question the Secretary's authority to waive interest accrual for borrowers whose payments have been suspended,' the organization said. Key Background Student loans have become a controversial political topic in recent years, as Democrats have made forgiveness a key issue while Republicans strongly oppose it. The SAVE plan was one of a number of incremental initiatives the Biden administration implemented in order to forgive student debt and lighten borrowers' repayments, after a coalition of GOP state attorneys general successfully challenged the administration's more sweeping plan to provide relief to most federal borrowers. The Trump administration has sought to make major changes to the student loan program in recent months and roll back Biden-era forgiveness programs, with Education Secretary Linda McMahon saying in April, 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.' The changes have included trying to move the federal student loan portfolio from the Education Department to the Small Business Administration and resuming debt collection for borrowers who have defaulted on their loans. President Donald Trump's domestic policy bill, which he signed into law last week, will also impose new limits on student loans and broadly overhaul the process for student loan repayments, limiting new borrowers to only two different payment plans. Further Reading Forbes How Trump's Spending Bill Will Impact Your Student Loans—As It Heads To President For Signature By Alison Durkee Forbes Trump Administration To Charge Interest On Student Loans In SAVE Plan By Adam S. Minsky Forbes Trump's Presidency And Student Loans: What Move To Small Business Administration Means For Borrowers By Alison Durkee Forbes Trump Resumes Defaulted Student Loan Collections Today—Impacting Millions Of Borrowers. Here's What To Know. By Alison Durkee
CNET
5 days ago
- Business
- CNET
SAVE Student Loan Borrowers, You Have Only a Few Days Left Before Interest Restarts. Should You Move to IBR?
Interest will restart for SAVE borrowers whose loans remain in a general forbearance on Aug. 1. Viva Tung/CNET If you're a student loan borrower enrolled in SAVE, you have about a week left to switch repayment plans before interest will begin accruing on your loans. But although interest payments will kick in, the change doesn't mean you have to switch repayment plans yet. Earlier this month, the Department of Education announced that on Aug. 1 interest would resume for the nearly 8 million borrowers on the Saving on a Valuable Education plan. Monthly payments, however, still remain on hold in a general forbearance. That gives you about a week to decide if you want to move onto another income-driven repayment plan or continue to stay on SAVE until the forbearance period ends. "It's crucial for borrowers to act based on their own personal situation," said Elaine Rubin, a student loan policy expert and director of corporate communications at Edvisors. "A borrower who chooses to stay in the forbearance or who is waiting for their payment plan application to be processed will have their loan remain in good standing." The SAVE repayment plan was shot down by the courts earlier this year, but borrowers' payments are expected to remain on hold until mid-2026 unless an upcoming court decision speeds up the timeline. If you're not sure about the best move for your loans, here's what experts suggest, and the one thing you should do if you leave your loans in SAVE. Do PSLF borrowers in SAVE need to do anything before Aug. 1? If you're working toward Public Service Loan Forgiveness and are enrolled in SAVE, you can either stay in forbearance or switch to another repayment plan. "For borrowers pursuing PSLF, this won't mean very much," said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors. "They can still either ride out the forbearance and plan on using what's called buy-back to get the months to count for PSLF purposes or switch plans now to another qualifying plan." If you decide to stay in forbearance, you'll be able to claim the months your loans were on hold using a process called PSLF buy-back. This allows you to pay for the months when your loans were in an administrative forbearance, to help you reach 120 on-time payments to receive forgiveness. If you decide to move your loans to another repayment plan, your payments will restart after your application is processed. Application processing is experiencing delays, and experts say not to expect your first payment under the new plan for a month or two, at the soonest. Although your payment may be higher on another income-driven repayment like IBR, this monthly amount would be the same amount you'd be charged when you went to "buy back" those months. Either way, you'll pay roughly the same amount. What should you do if you're pursuing income-driven repayment forgiveness? Although you're not required to switch repayment plans by August, you should review your options to see what the best fit is for your financial situation. "For those pursuing income-driven plan forgiveness, they should strongly consider switching to another income-driven plan," said Mayotte. She noted that there's no buy-back option for IDR forgiveness, and the months that your loans are sitting in forgiveness won't count toward your total number of payments. Waiting would drag out your forgiveness timeline. You can look at your other income-driven repayment plan options using the Federal Student Aid loan simulator. When you're ready to switch to a new plan, you can apply to change your IDR on the FSA website. You can also continue to stay in SAVE until the forbearance period ends and you're placed on another repayment plan. You can pay the monthly interest that accrues, but those payments won't count towards forgiveness, Mayonette said. Should you switch repayment plans if you don't qualify for forgiveness? If you don't qualify for student loan forgiveness options, you can switch to another IDR or continue to wait out the forbearance. Either way, you should count on making payments again soon -- whether that's a new monthly payment or paying off the interest that accrues each month during the forbearance period. Since there are a few weeks left before interest charges start again, Mayonette suggests making larger lump sum payments while your interest is frozen, if you can. Do all SAVE borrowers qualify for Income-Based Repayment? SAVE borrowers should qualify for another income-driven repayment plan. However, it's possible you may not right now. "The Big Beautiful Bill has eliminated the requirement of a partial financial hardship for IBR," said Rubin. "However, the forms and the Loan Simulator have yet to be updated. It may take the department and the servicers some time to update their systems and information." In the meantime, look for the most affordable repayment option available, or you can choose to keep your loans in forbearance. Will my payments increase if I move my loans from SAVE? Yes, most borrowers should expect higher payments when moving their loans from SAVE. Although income-driven repayment plans are generally more affordable than the standard repayment plan, SAVE was the most affordable student loan repayment plan to date. Many low-income borrowers had $0 or near $0 payments each month. CNET estimated that a single borrower earning $60,000 a year with $30,000 in student loan debt would have paid approximately $217 on SAVE. Switching to another income-driven repayment plan like IBR could increase their monthly payment by nearly $100. You can use the Federal Student Aid Loan Simulator to estimate what your new monthly payment will look like. If I switch payment plans, when will I receive my first bill? If you switch to IBR or another repayment plan, that doesn't mean your first monthly payment will hit in August. "The US Department of Education still has a backlog in processing the forms to request a change of repayment plan, so they might not have to make payments for a few months until their request to switch repayment plans is processed," said Mark Kantrowitz, a financial aid and student loan expert. Still, it's smart to prepare for repayment right away, just in case. My new student loan payment is too high. What can I do? Many borrowers will see higher payments on another payment plan, even an income-driven repayment plan like IBR. If you need more time to prepare for repayment, you can also wait to switch repayment plans until the forbearance period ends. "Borrowers will have the option to stay in the general forbearance, for now," said Rubin. "However, borrowers who decide to stay in the forbearance need to stay informed. The Department has indicated that borrowers will remain in the forbearance until the legal challenges are resolved, or until the student loan servicer can send them a bill for the proper repayment amount." If you need more time to prepare for repayment, leaving your loans on hold can give you extra months to plan. During this time, you should consider making interest-payments, if possible, to prevent your account balance from rising. "There are no prepayment penalties on federal and private student loans, so nothing stops you from making interest-only payments," said Kantrowitz. "You can manually calculate the interest on your loans and make a prepayment in that amount each month." While the forbearance period won't last forever, it is currently expected to last until mid-2026. However, an upcoming court case could change that and end forbearance sooner. If you're facing financial distress, you might consider economic hardship deferment, unemployment deferment or general forbearance, said Kantrowitz. But he warned that interest may continue to accrue, which could dig you into a deeper hole. You can reach out to your servicer or review financial hardship options on the FSA website.
