Latest news with #SavingonaValuableEducation
CNET
2 days ago
- Business
- CNET
SAVE Student Loan Borrowers Likely Won't Make Payments This Year, but Should Do This One Thing Now
Pla2na/Getty Images/CNET It's been a trying year for anyone enrolled in the Saving on a Valuable Education student loan repayment plan. There's been a barrage of student loan updates in 2025: proposed changes to Public Service Loan Forgiveness eligibility, an effort to restart collections on defaulted student loan accounts and a new Republican-fronted bill seeking to change existing income-driven repayment plan options. But the biggest news for most borrowers has been the court ruling blocking the SAVE repayment plan for 8 million borrowers. However, since that news, very little has been shared about what's next for SAVE borrowers. Currently, your loan payments remain paused in a general forbearance and your balance isn't collecting interest. That also means you're not making progress toward a loan forgiveness program like PSLF during the payment pause. While you can choose to switch to an alternative repayment plan, most experts suggest sticking with SAVE, and doing this one thing ahead of payments resuming. Here's what you need to know about when payments will restart for SAVE borrowers, how to choose a different income-driven repayment plan and what experts say you should do during this downtime. Read more: How Much Could Student Loan Payments Skyrocket for SAVE Borrowers? We Did the Math When will payments restart for student loan borrowers in SAVE? It's not clear when payments will start again for borrowers on the SAVE plan but it's looking like the end of this year would be the earliest timeframe. The Department of Education's website says SAVE plan borrowers will stay in a general forbearance until at least the fall. It also directed loan servicers to adjust the income recertification deadline to no earlier than Feb. 1, 2026. Robert Farrington, student loan expert and founder of The College Investor, expects the general forbearance to last even longer. "Borrowers will likely see the SAVE forbearance end in mid-to-late 2026," says Farrington. "Many borrowers are already reporting the end date of their forbearance moving to September 2026." Should PSLF borrowers in SAVE switch to another repayment plan? If you're a teacher, nurse or other public servant pursuing PSLF, you may be worried that the payment pause is not counting toward your 120-payment requirement. That leaves you with three options. First, you could switch from SAVE to another income-driven repayment plan (ICR, IBR or PAYE). That way, your payments will count toward PSLF's 120-payment requirement. Alternatively, if you would have hit 120 months of on-time payments if not for the pause, you can apply for the PSLF Buyback program to get credit for your time in forbearance. "This program [allows borrowers] to make a lump-sum payment for any months spent in administrative forbearance under SAVE, ensuring those months count towards PSLF," explains Megan Walter, NASFAA senior policy analyst. The downside of these first two options is that borrowers have been reporting processing delays. So don't expect a fast response. Last, if you've recently enrolled in PSLF or are not close to receiving forgiveness, you might prefer to wait until you're moved into a new payment plan. Yes, your months in forbearance won't count toward your 120-payment goal, but this could give you time to start saving for a potentially higher student loan payment. Whether you decide to change plans now or wait, make sure your decisions align with your financial goals. With SAVE no longer an option, it's important to understand all your avenues for paying back your student loans. What should SAVE borrowers do now? That doesn't mean you should sit back and do nothing, though. Take this time to prepare for the likelihood that your payments will increase in the future. You can use the Federal Student Aid's Loan Simulator tool to help calculate how much your monthly payment will be under different payment plans. While your payments are paused, you won't have to worry about your account being moved to collections. Although borrowers with defaulted loans are once again subject to collections, including wage garnishment, those enrolled in the SAVE plan don't have to worry about those consequences for now. Use this time to improve your finances, suggested Farrington. "This is a great time to pay off other debts (including private loans), build an emergency fund, contribute to an IRA and more." If you have the wiggle room in your budget, start paying yourself each month the same amount you'd pay your student loan servicer. Put this money into a high-yield savings account to earn a little extra interest on your savings.
The Star
5 days ago
- Business
- The Star
Resumed payments of U.S. student loans to strain personal finances, create challenges for economy: report
NEW YORK, May 26 (Xinhua) -- Millions of Americans had their student-loan payments put on pause during the COVID-19 pandemic, and now they are back on the hook again -- for borrowers, this means that every month, money that they presumably used to spend elsewhere is going to pay off debt instead. "Many who aren't paying are now considered delinquent or defaulted, a status that sinks credit scores," reported The Wall Street Journal about the development. "Around 5.6 million borrowers were marked newly delinquent on their student loans in the first three months of this year." "That will strain personal finances. At the same time, it creates fresh challenges for the broader economy," it noted. Borrowers have been required to repay their student loans for some months now. But just this month, the Trump administration began putting millions of defaulted student-loan borrowers into collections, and threatened to confiscate their wages, tax refunds and federal benefits. "The collections process was standard before the pandemic. But it is still likely to be a shock to those who haven't experienced it before, or who forgot what it was like," said the report. Economists at Morgan Stanley estimated this month that payments this year will rise by a collective 1 billion to 3 billion U.S. dollars a month. That could trim 2025 gross domestic product by about 0.1 percentage point, they said. The Morgan Stanley economists also note that there are about eight million borrowers in the Saving on a Valuable Education plan, or SAVE, a Biden-era plan that allows borrowers to pay based on their income but was challenged in courts. "Those borrowers will likely need to begin payments late this year or early next," added the report.
Newsweek
23-05-2025
- Business
- Newsweek
Trump Student Loan Changes Risk 'Punishing Ambition'
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Higher education experts have warned that President Donald Trump's plans to reduce student loan repayment options from borrowers could thwart "ambition and innovation." In an effort to streamline student loan repayment, the Trump administration is considering a sweeping overhaul of its federal student loan programs, cutting back multiple income-driven repayment (IDR) options to just two. The plans were put forward in the GOP's One Big Beautiful Bill Act, which was passed by the House of Representatives on Thursday. Currently, the federal student loan system offers several IDR plans that adjust monthly payments based on income and family size, which can offer relief for low-income borrowers, freelancers, and those in unpredictable job sectors. Under the proposed budget plan passed by the House, these options would be reduced to just two repayment structures: a standard 10-year plan and a "Repayment Assistance Plan." Higher education experts and borrower advocates warn that the move may increase repayment costs, sacrifice flexibility and put vulnerable borrowers at greater risk. "Consolidating repayment options into two streamlined plans may sound like simplification, but it could be a double-edged sword," Dr. Shaan Patel, CEO and founder of the standardized test prep and college admissions company Prep Expert, told Newsweek. "The current menu of repayment plans—while admittedly confusing—allows borrowers to match repayment to their financial circumstances." Donald Trump and a student are seen in this composite image created by Newsweek. Donald Trump and a student are seen in this composite image created by Newsweek. Photo IllustrationStudent Borrower Protection Center has estimated that the new proposed repayment plan would increase payments by $2,928 a year for a typical student loan borrower enrolled in former President Joe Biden's Saving on a Valuable Education (SAVE) plan, if it is not blocked by the courts. There is fear this reduced menu of options will also disproportionately impact borrowers whose financial lives don't fit neatly into a predictable mold. "Many borrowers—particularly first-generation graduates, freelancers, or those entering volatile industries—depend on flexible, income-based options to stay afloat," Patel said. "If not, we'll see higher delinquency and default rates—especially among the borrowers this reform is supposedly meant to help." Proponents argue that the simplified structure will reduce confusion that often leaves borrowers stuck in punishing repayment plans or facing unexpected interest growth. However, experts say the real issue isn't the number of choices—it's a lack of education about those choices. "Confusion is a solvable problem with better education and outreach—not fewer choices. Imagine if we tried to fix the complexity of health insurance by only offering two plans. The outcome wouldn't be clarity—it'd be rigidity," Patel said. The changes could also impact what future would-be students would pursue in higher education, Patel explained. "Roughly 70 percent of federal borrowers rely on IDRs, especially early in their careers. These are often teachers, social workers, or entrepreneurs—people whose incomes are inconsistent but whose degrees provide immense long-term value," Patel explained. "If the new repayment model doesn't flex with income volatility, we risk punishing ambition and innovation in favor of uniformity." "I would imagine that the new repayment plans would cover the vast majority of borrower situations," Jack Wang, host of the Smart College Buyer podcast, told Newsweek. "But I think the new rules will impact career choices, such as those entering the arts or fields that tend to have lower starting pay but yet require advanced degrees." "If the proposed changes go through, my opinion is that higher education will be similar to what it was decades ago—only the kids from rich families can go to college," he continued. "And only those rich kids can go to medical, law, dental, vet school. It's kind of bleak." The proposed changes are part of a broader budget bill that includes substantial cuts to federal student aid, including the elimination of loan forgiveness options after 20 or 25 years under current IDR plans. The bill also aims to repeal the SAVE plan, one of the Biden administration's centerpiece reforms, which reduced monthly payments for low-income borrowers and shortened the forgiveness timeline for smaller loan balances. While the bill has passed in the House, it faces an uncertain future in the Senate, where it is expected to encounter stronger opposition.
Newsweek
21-05-2025
- Business
- Newsweek
Student Loan Borrowers Could Wait 2 Years to Get Applications Approved
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Student loan borrowers might have to wait two years to get their repayment plan applications approved as the Department of Education deals with a massive income-driven repayment (IDR) plan backlog. The Education Department previously disclosed that more than 1.98 million IDR applications were pending at the end of April. Only 79,000 requests had been approved or denied during that month. If the Education Department continues to move at this rate, it would take more than two years to process all remaining applications, according to the Student Borrower Protection Center. Why It Matters President Donald Trump's new Education Department this year has so far caused many federal student loan borrowers to see their monthly payments for income-driven repayment programs climb from $500 to $5,000. Roughly 43 million Americans have some sort of student loan debt, and the Education Department reports Americans collectively have $1.5 trillion in student debt nationwide. US Secretary of Education Linda McMahon prepares to testify before a House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies hearing on the budget for the Department of Education, on Capitol Hill... US Secretary of Education Linda McMahon prepares to testify before a House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies hearing on the budget for the Department of Education, on Capitol Hill in Washington, DC on May 21, 2025. More BRENDAN SMIALOWSKI/AFP via Getty Images What To Know Around 2 million federal student loan borrowers are waiting in the backlog to see if their applications for more affordable repayment plans are approved, according to new data from the U.S. Department of Education. In a May 15 court filing, the department showed the extent of how many borrowers are waiting to see if they can get a plan based on their discretionary income. Online applications were reinstated in March by the Trump administration after originally being paused due to a court order blocking Biden's original SAVE (Saving on a Valuable Education) IDR plan. The backlog could create further financial difficulties for borrowers, as nearly 10 million people could default on their loans within months, according to the department. Many have come out against the backlog after Trump implemented several changes in the agency, but the current Department of Education blamed former president Joe Biden's administration, saying it "failed to process income-driven repayment applications for borrowers, artificially masking rising delinquency and default rates and promising illegal student loan forgiveness to win points with voters." "The Trump Administration is actively working with federal student loan servicers and hopes to clear the Biden backlog over the next few months," a spokesperson said, as reported by CNBC. As SAVE was being challenged by the courts, the Biden administration put all student loan borrowers enrolled in SAVE in interest-free forbearance. During the first few months of Trump's second term, he cut roughly half of the Education Department's staff, which may have contributed to the backlog. Newsweek reached out to the Department of Education for comment via email. What People Are Saying Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "What was meant to make the student loan process more efficient has turned into a nightmare. Nearly two million borrowers who applied for income-driven repayment plans are effectively stuck in limbo while they wait to see if they'll be approved or denied. And with a renewed push to collect payments from borrowers, this backlog is only going to present more headaches for those affected. The hope, obviously, is a new administration can offer some quicker solution than the current procedure." Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "This affects millions of borrowers now back in repayment, many of whom applied for forgiveness or income-driven repayment caps just to keep their finances afloat. Without that relief, a big chunk of their paycheck could be taken to cover loans; money they need for rent, food, or other bills." What Happens Next If the Education Department continues to process applications at its current rate, it would take more than two years for all borrowers to get a decision, according to the Student Borrower Protection Center. As those applications get delayed or stuck in the system, borrowers may be forced to make tough choices, Thompson said. "Some could fall behind on credit cards or other debts. If this drags on, we could see a domino effect: more defaults, more financial strain, and more pressure on the broader economy... Time is of the essence. If this isn't resolved soon, the consequences could compound quickly."
CNBC
20-05-2025
- Business
- CNBC
Education Department backlog leaves nearly 2 million student loan borrowers in limbo
Nearly 2 million federal student loan borrowers who've requested to be in an affordable repayment plan are stuck in a backlog of applications, waiting to be approved or denied, according to new data recently shared by the U.S. Department of Education. The Education Department disclosed the information in a May 15 court filing in response to a legal challenge lodged by the American Federation of Teachers. The teachers' union sued the Trump administration in March for shutting down access to income-driven repayment plan applications on the Education Department's website. IDR plans cap borrowers' monthly bills at a share of their discretionary income with the aim of making their payments manageable. More from Personal Finance:House Republican bill calls for bigger child tax creditStudent loan borrowers in default may see 15% of Social Security benefit garnishedHow college savers can manage 529 plans in a turbulent market In late March, the Trump administration made the online applications available again, and said that it pulled the forms because it needed to make sure all repayment plans complied with a court order that blocked the Biden administration's new IDR plan, known as SAVE, or the Saving on a Valuable Education plan. Trump officials argued that the ruling had broader implications for other IDR plans, and it ended up removing the loan forgiveness component under some of the options. The backlog complicates things for borrowers as the Trump administration restarts collection activity. The Education Department estimates that nearly 10 million people could be in default on their student loans within months. Without access to an affordable repayment plan, student loan borrowers can be suspended on their timeline to loan forgiveness and at risk of falling behind and facing collection activity. In the May court document, the Education Department disclosed that more than 1.98 million IDR applications remained pending as of the end of April. Only roughly 79,000 requests had been approved or denied during that month. Consumer advocates slammed the findings. "This filing confirms what borrowers have known for months: Their applications for loan relief have effectively been going into a void," said Winston Berkman-Breen, legal director at the Student Borrower Protection Center. The Center said that if the Education Department continued to move at its current rate, it would take more than two years to process the existing applications. AFT President Randi Weingarten called the backlog "outrageous and unacceptable." "This is the opposite of government efficiency," Weingarten said. "Millions of borrowers are being denied their legal right to an affordable repayment option." A spokesperson for the Education Dept. blamed the backlog on the Biden administration, saying that it "failed to process income-driven repayment applications for borrowers, artificially masking rising delinquency and default rates and promising illegal student loan forgiveness to win points with voters." "The Trump Administration is actively working with federal student loan servicers and hopes to clear the Biden backlog over the next few months," they said. The Biden administration put the student loan borrowers who'd enrolled in its new IDR plan, SAVE, into an interest-free forbearance while the GOP-led legal challenges to the program unfolded. Many of the currently pending IDR requests are likely from borrowers who are trying to leave that blocked plan to get into an available one. Sarah Sattlemeyer, a project director at New America and senior advisor under the Biden administration, said that the current backlog began last year "and has existed across both the Biden and Trump administrations" as a result of the legal battle over the SAVE plan. "It is a demonstration of how complicated the loan system is, how much uncertainty there has been over the last few years and what is at stake," Sattlemeyer said. "There also isn't clarity around how some applications in the backlog should or will be handled, such as those where a borrower chose an option that no longer exists on the application." In recent months, the Trump administration has terminated around half of the Education Department's staff, including many of the people who helped assist borrowers. That is also likely one reason why so many of the applications haven't been processed, said higher education expert Mark Kantrowitz. "Perhaps the reduction in staff is affecting their ability to process the forms," Kantrowitz said.
