Latest news with #StudentLoanServicingAlliance
Washington Post
30-07-2025
- Business
- Washington Post
Enrolled in this student loan repayment plan? It's time to consider an exit.
If you're one of the 7.7 million people enrolled in the student loan repayment plan known as Save, it is time to consider an exit. In less than a week, the Education Department will resume applying interest on loans being repaid through the Biden-era program. And in less than three years, the program will cease to exist, which could happen sooner if Republicans succeed in abolishing the plan through the courts. The Save saga has spanned two administrations and left millions of borrowers in a state of uncertainty. The income-driven program, which President Joe Biden introduced in 2023, offers low monthly payments and a faster path to loan forgiveness. In two separate legal challenges last year, Republican-led states accused Biden of exceeding his legal authority by creating a multibillion-dollar program without congressional approval. An injunction in one of those cases has left Save in legal limbo since last summer and led the Education Department to postpone payments for enrollees through an interest-free forbearance. But the department will return to adding interest to loan balances on Aug. 1, weeks after the tax law that President Donald Trump signed this month ended Save and gave enrollees until 2028 to leave the plan. 'If you're on Save, you better start looking at options and figuring out which one best fits you,' said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for loan servicers. 'Sitting on the sidelines is not a good strategy because we definitely know it's going away.' There are as many moving parts as there are options for borrowers. Here's what we know. It's going away. Earlier this month, the Education Department said it would resume applying interest on Aug. 1 to the loans held by borrowers enrolled in Save. Those borrowers have benefited from an interest-free forbearance that postponed their payments since last summer amid the ongoing lawsuit. The department said ending the subsidy is necessary to comply with the court injunction that put Save on hold, but a borrower affected by the decision is petitioning the court to stop the agency. Unless the court intervenes, interest will restart soon. The Education Department is encouraging Save enrollees to switch to another plan, but borrowers can continue to postpone their payments and remain in the Save forbearance. Yet they will soon see interest accrue on their loans. 'The forbearance isn't ending. So people have time. They don't have to do anything right this second, and what they should do sort of depends on their long-term student loan strategy,' said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors. Both cases are still in play. First, a refresher. Republican-led states filed separate lawsuits in Kansas and Missouri last year to strike down Save. District judges in both cases imposed temporary injunctions on components of the plan, such as capping monthly payments at 5 percent of a borrower's discretionary income. The U.S. Court of Appeals for the 10th Circuit decided last June to stay the injunction in Kansas, letting the Education Department move forward, but the case in Missouri brought everything to a halt. Dissatisfied with the partial injunction, Missouri Attorney General Andrew Bailey petitioned the U.S. Court of Appeals for the 8th Circuit to halt the Save plan in its entirety amid ongoing litigation. The court agreed and later expanded the injunction. So where do things stand now? The courts have yet to rule on the merits of the lawsuits against Save, even though the injunction has put payments on hold since last summer. The Trump administration could decide to stop defending the Save plan in court, especially now that congressional Republicans have used the savings from eliminating the program to offset the cost of extending tax cuts. The Education Department did not immediately respond to inquiries about the fate of the lawsuits. If the courts decide to rule on the merits of either lawsuit this year, it could bring the Save plan to an end sooner than the tax bill dictates. As it stands, the tax law gives current Save enrollees until July 1, 2028, to change plans. The tax law that Trump signed into law this month gets rid of Save. The plan will cease to exist for new borrowers beginning July 1, 2026, while people who are currently enrolled in Save will have until July 1, 2028, to switch out of the plan. Instead of seven repayment options, congressional Republicans have whittled the choices down to two new plans. The new standard plan will stretch monthly payments out from 10 to 25 years, depending on the size of the debt. People with larger debts, say more than $100,000, will be in repayment for up to 25 years, while those who owe less than $25,000 will repay for no more than 10 years. Meanwhile, payments on the new income-driven repayment plan, dubbed the Repayment Assistance Plan, are based on a borrower's total adjusted gross income, ranging from 1 to 10 percent depending on earnings. Borrowers would have to make a minimum monthly payment of $10, ending the zero-dollar payment option for low-wage borrowers. People who are keeping up with their bills but not making progress on paying down the principal will have their principal reduced by up to $50 a month. The government will also waive any interest that is left over after a borrower makes a monthly payment. Say your payment is $60 but you owe $80 a month in interest, the Education Department will waive the remaining $20. The RAP plan offers small monthly loan forgiveness, but instead of forgiving the remaining balance after 20 or 25 years of payments as custom under other IDR plans, the new one extends the term to 30 years. These two plans will be the only options afforded to new borrowers after July 1, 2026. Current borrowers have a few options. They can choose either of the new plans or migrate over to an older plan known as Income-Based Repayment, which was created by Congress in 2007. That plan caps monthly payments at 15 percent of discretionary income for people who took out loans before July 2014. For those who borrowed after that date, payments are capped at 10 percent. 'Borrowers who have been paying for a while feel exhausted and confused, [and] should take heart that Congress has finally stepped in to provide clarity, because absent that, the executive branch and courts have made it unbearably confusing,' said Alex Ricci, president of the National Council of Higher Education Resources, which represents private lenders, loan servicers, debt collectors and loan guaranty agencies. Switching to IBR could appeal to borrowers who are close to hitting the mark to receive loan forgiveness. Rather than contend with the 30-year schedule under the new RAP, borrowers with pre-2014 loans qualify for debt cancellation after 25 years under IBR and those with newer loans can have their remaining balances erased after 20 years. Yes, the remaining three IDR plans — Income-Based Repayment, Pay As You Earn and the Income-Contingent Repayment — are still open to borrowers, at least for now. After July 1, 2028, only the IBR plan will remain an option for current borrowers because of changes in the tax bill. For now, borrowers can enroll in the three plans and accrue qualifying payments toward loan forgiveness, said Kyra Taylor, a staff attorney at the National Consumer Law Center. Borrowers in Save can make payments on their loans, but they will not count toward debt cancellation. The other IDR plans have different terms depending on when you borrowed and whether you have loans for undergraduate or graduate school. The loan simulator on can help borrowers determine which plan is most affordable for them, but Taylor said that some borrowers have complained of not getting accurate calculations. Education Department officials said they are not aware of any problems with the simulator and noted borrowers can also contact their loan servicer — the companies that manage the federal portfolio — for help. Servicers are contending with a backlog of 1.5 million IDR applications dating back to last year. Buchanan at the servicing alliance said a big portion of the backlog is people who selected the lowest monthly payment option on an older version of the application that included Save. The Education Department revised the application earlier this year to comply with the Save injunction and is encouraging anyone who applied between July 2024 and April 2025 before the update to resubmit. Getting through the process should also be easier now that the department has re-enabled a function that allows borrowers to consent to have their tax data imported from the IRS. Persis Yu, deputy executive director at the Student Borrower Protection Center, cautions borrowers to take into consideration that their payments change if their financial situation has changed since submitting a prior application. 'If your income has changed, it may mean that you're going to get bumped up to a higher payment amount. That is something that people should be aware of,' Yu said. Save enrollees working toward Public Service Loan Forgiveness — which cancels loans of government and nonprofit employees after 10 years of service and 120 monthly debt payments — have a couple of options. They can switch to another IDR plan, as many have already done. Yu said that while other plans will cost more than Save, for borrowers who are nearing the forgiveness threshold, it may be worth the momentary sacrifice. Public servants can also remain in the Save forbearance, though those months will not count toward cancellation. But they could take advantage of a PSLF buyback initiative to retroactively make a lump-sum payment to get credit for the forbearance period. 'The people that are closer to the 120 now are more content with the idea of buyback than the people who maybe still have eight years in front of them,' Mayotte said. 'Some people have other financial priorities right now and would rather suck it up down the road and pay the lump sum.'
NBC News
19-07-2025
- Business
- NBC News
Student loan bills could double for some borrowers as Biden-era relief expires
As a Biden-era relief measure for federal student loan borrowers comes to an end, some people could see their bills more than double. Earlier this month, the Trump administration announced that the so-called SAVE interest-free payment pause will expire on Aug. 1, and that enrollees' education debts will begin to grow again if they don't make payments large enough to cover the accruing interest. The Biden administration had moved people who enrolled in its SAVE plan into forbearance — a period during which federal student loan borrowers are excused from making payments — while the legal challenges against its program played out. The SAVE, or Saving on a Valuable Education, plan, is now essentially defunct. While borrowers can remain in the SAVE forbearance for the time being, they'll face interest charges again starting next month if they do. But those who look to move into another repayment plan will likely face a much larger monthly bill. 'SAVE was incredibly generous,' said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. The 'best plan' for former SAVE borrowers Nearly 7.7 million federal student borrowers enrolled in the SAVE, plan, the Education Department said in its press release earlier this month. Secretary of Education Linda McMahon said in a statement that borrowers in SAVE should 'quickly transition to a legally compliant repayment plan — such as the Income-Based Repayment Plan.' Borrowers who wanted to be in the SAVE plan but now can't be should probably switch into the IBR plan, Buchanan said: 'That's the best plan for almost everyone.' There are a few reasons for that. One is that other income-driven repayment plans will eventually be phased out under President Donald Trump 's 'big beautiful bill.' (Congress created income-driven repayment plans back in the 1990s to make student loan borrowers' bills more affordable. The plans cap borrowers' monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.) End of SAVE means bigger student loan bills But borrowers could see their monthly bills double under IBR, compared with on SAVE. That's because the SAVE plan calculated payments based on 5% of a borrower's discretionary income. IBR takes 10% — and that share rises to 15% for certain borrowers with older loans. Many federal student loan borrowers simply won't be able to afford the payments under IBR, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York City. 'In severe cases, it could result in people being forced to move, or they will just resign themselves to default and involuntary collections,' Nierman said. In the new legislation passed by Republicans, borrowers will have access to another income-driven repayment plan, called the 'Repayment Assistance Plan,' or RAP, by July 1, 2026. However, it's uncertain whether a borrower will have a lower monthly payment on RAP than IBR. 'It's going to range dramatically based on your income,' Buchanan said. There are tools available online to help you determine how much your monthly bill would be under different plans. Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, said she's working with one partner in a married couple, both with federal student loans, who are facing a nearly $4,000 monthly combined student loan payment under IBR. 'My client said that these payments would mean no extracurricular activities and other opportunities for his children, which might set them back in comparison to their peers,' Rodriguez said. Under SAVE, the family's student loan bill would have been around $2,400, she said. Borrowers who can't afford to make a monthly payment on their student debt under the current repayment options can pursue deferment and forbearance options. Those who've taken out loans before July 1, 2027, will maintain access, for example, to the economic hardship deferment and the unemployment deferment, under the new law.
CNBC
19-07-2025
- Business
- CNBC
Student loan bills could double for some borrowers as Biden-era relief expires
As a Biden-era relief measure for federal student loan borrowers comes to an end, some people could see their bills more than double. Earlier this month, the Trump administration announced that the so-called SAVE interest-free payment pause will expire on Aug. 1, and that enrollees' education debts will begin to grow again if they don't make payments large enough to cover the accruing interest. The Biden administration had moved people who enrolled in its SAVE plan into forbearance — a period during which federal student loan borrowers are excused from making payments — while the legal challenges against its program played out. The SAVE, or Saving on a Valuable Education, plan, is now essentially defunct. While borrowers can remain in the SAVE forbearance for the time being, they'll face interest charges again starting next month if they do. But those who look to move into another repayment plan will likely face a much larger monthly bill. "SAVE was incredibly generous," said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. Nearly 7.7 million federal student borrowers enrolled in the SAVE, plan, the Education Department said in its press release earlier this month. Secretary of Education Linda McMahon said in a statement that borrowers in SAVE should "quickly transition to a legally compliant repayment plan — such as the Income-Based Repayment Plan." More from Personal Finance:Trump's 'big beautiful bill' caps student loans. What it means for youWhy 22 million people may see a 'sharp' increase in health premiums in 2026Trump's 'big beautiful bill' cuts SNAP for millions of families: Report Borrowers who wanted to be in the SAVE plan but now can't be should probably switch into the IBR plan, Buchanan said: "That's the best plan for almost everyone." There are a few reasons for that. One is that other income-driven repayment plans will eventually be phased out under President Donald Trump's "big beautiful bill." (Congress created income-driven repayment plans back in the 1990s to make student loan borrowers' bills more affordable. The plans cap borrowers' monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.) But borrowers could see their monthly bills double under IBR, compared with on SAVE. That's because the SAVE plan calculated payments based on 5% of a borrower's discretionary income. IBR takes 10% — and that share rises to 15% for certain borrowers with older loans. Many federal student loan borrowers simply won't be able to afford the payments under IBR, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York City. "In severe cases, it could result in people being forced to move, or they will just resign themselves to default and involuntary collections," Nierman said. In the new legislation passed by Republicans, borrowers will have access to another income-driven repayment plan, called the "Repayment Assistance Plan," or RAP, by July 1, 2026. However, it's uncertain whether a borrower will have a lower monthly payment on RAP than IBR. "It's going to range dramatically based on your income," Buchanan said. There are tools available online to help you determine how much your monthly bill would be under different plans. Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, said she's working with one partner in a married couple, both with federal student loans, who are facing a nearly $4,000 monthly combined student loan payment under IBR. "My client said that these payments would mean no extracurricular activities and other opportunities for his children, which might set them back in comparison to their peers," Rodriguez said. Under SAVE, the family's student loan bill would have been around $2,400, she said. Borrowers who can't afford to make a monthly payment on their student debt under the current repayment options can pursue deferment and forbearance options. Those who've taken out loans before July 1, 2027, will maintain access, for example, to the economic hardship deferment and the unemployment deferment, under the new law.
Politico
18-07-2025
- Business
- Politico
460K student loan borrowers to be denied repayment plan
'Loan servicers cannot process these applications as SAVE is no longer an option, as it is illegal,' a department spokesperson wrote in a statement to POLITICO. The agency is introducing two new payment plans and phasing out the matrix of current options as part of President Donald Trump's sweeping reconciliation legislation. His administration has railed against SAVE for being a burden to taxpayers and called for simplifying the loan repayment process as part of a broader strategy to reshape how students borrow and pay back loans. Borrowers who were signed up for SAVE are in a forbearance while the courts decide the program's future. The department has previously stated it plans to move SAVE borrowers to different plans in the fall and has encouraged them to explore other repayment options. Some student loan experts argue that borrowers may have not known they were applying for SAVE when selecting the lowest monthly payment option. It's a 'bit of struggle to understand' if they intended to apply for the Biden-era program that's on hold, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a servicer trade group that represents MOHELA and Aidvantage, among others. He said its best to have borrowers just reapply entirely for a student loan repayment plan. Student debt relief advocates are concerned people could have higher monthly payments and end up paying more in the long run since borrowers couldn't make qualifying payments toward forgiveness while in the SAVE forbearance. 'If their income has shifted in the last year, it's going to result in a higher payment,' said Persis Yu, the deputy executive director and managing counsel at Student Borrower Protection Center. 'Since this time hasn't counted toward cancellation, it means that people are ultimately going to be paying more on their loans during the life of it.'
Yahoo
09-06-2025
- Business
- Yahoo
Federal vs. private student loans: What borrowers should know
Many student loan borrowers may not realize how different federal and private loans can be when it comes to repayment. Student Loan Servicing Alliance executive director Scott Buchanan explains what to know about repayment plans, budgeting strategies, and how to handle loans in default. To watch more expert insights and analysis on the latest market action, check out more Wealth here. While student loans offer a grace period for repayment, you will usually eventually have to pay them back. Yeah. All week, we're giving you everything that you need to know about paying back this money. And today, we're breaking down the difference between paying off federal and private student loans. For that, we have Scott Buchanan, who's the Student Loan Servicing Alliance Executive Director. Scott, good to have you here with us. So let's start by explaining the difference between federal and private loans. Yeah. Thanks, Brad, for having me. Um, yeah, the difference is primarily is who is the lender. Um, federal student loans are lent directly by the federal government using money from Treasury. And private education loans are generally made by banks or other financial institutions, um, using sort of a private credit. Um, they're very similar in private education loans to other consumer credit like credit cards or mortgages or things like that where there are there's a test of credit worthiness, um, that that the lender will make. Um, as opposed to the federal student loan program where generally, it's a federal entitlement, and so if you're going to school have filled out the FAFSA, then you're entitled to get those loans. How should borrowers approach federal loans? Listen, federal loans are incredibly flexible in terms of your repayment options. You need to know what kind of loan you have. Do you have a unsubsidized loan? Do you have a plus loan or things like that, um, because they can have different benefits. But there's a lot of options, including forbearances, deferments, income-driven repayment plans, um, that can all dramatically adjust your monthly payment amount. Um, so something you need to always look at is the total balance of your loans and thinking about even when you're in school and thinking about potential repayment, remember you're going to have to borrow the course of two or four years. Um, and think about that in your repayment options. What about private loans? When should borrowers consider applying for them? Listen, you should always apply for these loans as early as possible. Once you get your federal financial aid award letter from your institution, talk to the financial aid office. Make sure you've maximized any institutional aid, um, that you can possibly get that would reduce the amount you have to borrow. Figure out how much federal loan ability you have, and then determine what your gap is going to be because the federal loans may not cover all your costs, and that's when you might turn to private education loans. And doing so earlier is better because you can shop around on private education loans and find a lender, um, who's got the best offering for you in terms of an APR, um, and the best sort of program options that are available under that loan. So what should the plan of attack be for repayment? Yeah. Well, listen, make a budget like all financial things. Um, you need to know in advance, like that's sort of the advantage of of of, you know, sort of going to school and having this period of time generally when we don't have to make repayment. You have plenty of time to put together sort of what your plan of action is going to be when you graduate and leave. Um, so, you know, number one, don't overborrow in the first place, as I always say. Um, but if you have already borrowed, um, then make sure that you sit down, figure out each monthly payment that you're going to have, the differences between your federal and your private loans because they're going to all have different monthly payments, different interest rates, um, and then put together a budget, a plan of action about how you're going to do it. If, remember, when you first graduate, your income is likely to be a lot lower than it will be in the future, that's when you need to talk to your federal loan servicer and say, hey, here's my financial situation on the federal student loans. How can I lower my monthly payment or how can I meet this this budget that I have today? And they're going to have a lot more options, whereas on the private loan side of things, um, it's going to be relatively set about the monthly payment. If your loan has gone into default, what are the steps that you should start to take to make sure that you get back into good standing? Yeah. Well, that's very different between federal and private loans as well. But on the federal student loan, um, once you reach 270 days delinquent, your loan can go into default. And that's when you need to call the Default Resolution Group at the Department of Education. Um, they will reach out and let you know that you're in default, and your servicer will as well. Um, but that's who you need to talk to. There are lots of options, including rehabilitating the loan, potentially consolidating the loan, um, because getting out of default, um, is something that you definitely want to do. And that's why loan rehabilitation would probably be your best bet on federal student loans because that removes that default from your credit history. On private education loans, it's different, and that's why you need to be very mindful about keeping on top of those private education loans because once they go into default and charge off, there's not a whole lot you can do other than sort of negotiate a settlement or potentially a repayment plan, um, to try to resolve the total amount of that debt. And so once you have finally gotten to the point where you've fully paid off your student loans, then at that point, how are you kind of able to take advantage of other tax advantages as well that you should be making sure that you're also reporting? Sure, absolutely. Uh, there's a there's a federal interest deduction on on student loans that you can take advantage of potentially. Now, that is tied to income. Um, so, you know, the higher income you are, the less likely are you to be able to take that benefit. But you should definitely during all of your repayment make sure that you're uh that you're uh as you're doing it in TurboTax or working with your accountant, make sure that you calculate the amount of interest that you pay. You'll get a statement from your loan servicer, just like you get W-2s and other things, um, from uh from your employer, and they will tell you how much interest may be eligible, and you should definitely take advantage of that. Scott, thanks so much for taking the time and breaking this all down.
