Latest news with #repayment
Telegraph
3 days ago
- Business
- Telegraph
What is a part and part mortgage?
If you're undertaking the often daunting task of choosing a mortgage, not only will you need to look at the type of mortgage you want – fixed or tracker – you'll need to select the length of the deal you want, as well as the repayment option that suits you. Usually, you'll need to choose between repayment – where you'll pay off both the loan interest and capital amount you've borrowed – or interest-only, where you just pay the interest. But there's a lesser-known hybrid version that could suit you, too. This is often referred to as a 'part and part' mortgage. Here, Telegraph Money explains how these deals work and the pros and cons you should consider before taking one on. What is a part and part mortgage? How does a part and part mortgage work? Advantages of this mortgage deal Disadvantages of part and part mortgage s Part and part mortgage FAQs What is a part and part mortgage? A part and part mortgage – also known as 'part interest-only' – is a combination of repayment and interest-only mortgages. Since part of your home loan will be on interest-only, there will still be an outstanding amount to be repaid in full at the end of your mortgage term. Nicholas Mendes, from broker John Charcol, said: 'Used well, part and part can strike a balance between reducing monthly payments and maintaining some capital repayment. 'But there's a clear trade-off. If the repayment plan doesn't materialise, you're left with a significant balance to clear at the end of the term.' How does a part and part mortgage work? As an example, you could get a part and part mortgage for £350,000, with £200,000 on a repayment basis, while the remaining £150,000 is interest-only. This kind of set-up would make for smaller monthly payments, since you're essentially removing the capital repayment element on a portion of your borrowing. However, at the end of the term, you'll need to pay off the full interest-only amount – in this case, £150,000. To be eligible for even a small element of interest-only, you will need to demonstrate that you have a repayment strategy in place – that is, evidence that you have a means of repaying the debt when the time comes. This could be money saved in a stocks and shares Isa, an endowment policy, the sale of a second home or a pension fund. Lenders will usually have a limit on how much of the mortgage can be allocated as interest-only, and this could also vary depending on your circumstances. Income thresholds are often higher, said Mr Mendes, usually starting from £50,000 to £100,000 for single applicants, and most lenders will cap the amount you can borrow at 50 to 75pc for that portion of the mortgage. To reduce the interest-only lump sum that's due when the mortgage term ends, you might be able to apply to increase the portion of your mortgage on repayment in the future to continue chipping away at the original amount you borrowed. Advantages of this mortgage type Your monthly payments will be lower than with a repayment mortgage. These mortgages can be helpful if you're on a strict budget, when property prices are high, or interest rates are rising. A relatively small saving of even a couple of hundred pounds per month could make all the difference to securing the home you want. If you already have an interest-only mortgage, going for 'part and part' can help you start chipping away at the capital, without the shock of going all in. Part and part mortgages are flexible, which means that you can make overpayments if you can afford to. However, this will only be applied to the repayment portion of the mortgage, so the limits before early repayment charges (ERCs) kick in will be lower. It's best to check these details with your lender before you make any overpayments. Disadvantages of part and part mortgages You will pay more interest overall compared to a repayment mortgage. It could take longer to pay off your mortgage. Mortgage lenders may have limits on how much of your mortgage can be interest-only. You will need to have a means of paying off the chunk of interest-only borrowing when the term ends. If you can't, you'll be at risk of losing your home. Part and part mortgage FAQs Can I use a part-and-part mortgage on any type of mortgage deal? A part and part repayment mortgage is available on a fixed rate, discounted rate or tracker loan. The key is whether the lender will approve it according to your affordability and how you intend to repay the remaining debt at the end. Which lenders offer part and part mortgages? Not all lenders offer this choice and have repayment or interest-only as the only options. Halifax, HSBC, Leeds Building Society and Skipton Building Society are among the lenders that do offer part and part options. It's worth checking before you apply if it's offered. How do I get a part and part mortgage? You'll need to apply for your home loan in the same way as any other and pass affordability and credit checks. Since part and part repayments aren't available from all lenders, it might be more straightforward to enlist the help of a mortgage adviser who can help find a home loan to suit you. Beforehand, you could speak to your existing lender to see what they can offer. Can I switch to a repayment mortgage later? When you come to remortgage, you may be able to switch to a full repayment mortgage if you want to. However, note that this will usually mean an increase to your monthly payments, and your lender will want to make sure this is affordable for you. How do I know if a part and part mortgage is right for me? A part and part mortgage might be useful if you're paying interest-only at the moment and want to make a move towards repayment – but not going the whole way. It can help ease into higher repayments. It could also help if you're soon to receive a windfall – perhaps inheritance or a big bonus from work, and need to keep repayments lower until the money lands. If in doubt, a mortgage adviser will be able to help find the best mortgage for you.
CNET
3 days ago
- Business
- CNET
SAVE Student Loan Update: Don't Expect to Make Payments This Year, but Do This One Thing ASAP
Pla2na/Getty Images/CNET There's been a lot of student loan chatter, but little clarity for borrowers enrolled in the Saving on a Valuable Education repayment plan. We've witnessed several updates to student loan programs this year, from proposed changes to Public Service Loan Forgiveness eligibility to the ramping up of collections efforts on defaulted student loan accounts to a new Republican-fronted bill seeking to change existing income-driven repayment plan options. But the official rejection of SAVE may have the biggest impact for the 8 million borrowers who qualified for lower monthly payments. Now that we know SAVE is officially out, what's next? Should you switch to another income-driven repayment plan? Or wait it out? I talked to experts to find out when payments are expected to restart and what 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." Currently, loan payments for any borrower in SAVE remain on hold in a general forbearance and your balance isn't accruing interest. If you're enrolled in a loan forgiveness program like PSLF, each paused month will not count towards your forgiveness during the 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. Should PSLF borrowers in SAVE switch to another payment 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 right 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.
CNET
6 days ago
- Business
- CNET
Have Student Loan Debt? These 6 Expert-Approved Moves Can Get You Back on Track
Regardless of your situation, there are ways to take charge of your student loans. Getty Image/Zooey Liao/CNET After a five-year payment pause, it's understandable that your student loans may not have been top of mind for some time (if ever). And with a barrage of news about the end of the Saving on a Valuable Education plan and the ramp-up of wage garnishment efforts, it's also understandable that you might be confused. I get it. I'm a student loan policy expert who's worked in the industry for more than 15 years, so I know the past few years have been trying ones for borrowers. It's easy to feel like everything happening with student loans is out of your hands. But there's still time for you to take charge of your student loans, and you don't need to let it all overwhelm you. Instead, follow my six recommendations to get yourself back on track and in control. Read more: SAVE Student Loan Borrowers Likely Won't Make Payments This Year, but Should Do This One Thing Now Figure out your student loan balance Do you know how much you owe in total on your student loans? It's a question that many borrowers can't answer when I ask them. You might have an idea (or think you do). But it's important to check, especially if you think you may be behind on your payments. Many borrowers I've worked with are surprised to find they owe more than they initially borrowed when it's time to start repayment. This is because most loans, except subsidized ones, begin accruing interest from the moment they are disbursed. Outstanding interest, which has not been capitalized or added to your loan, is listed separately from the principal balance. To fully understand your loan balance, it's important to carefully review your statements. If you know who your student loan servicer is, you can log into your online account to check your balance. If you're not sure, you can find out by logging into your Federal Student Aid account and visiting the My Aid page. Read more: 5 Ways to Pay Off Your Student Loans Even Faster Prepare to restart payments If you are enrolled in the Saving on a Valuable Education Plan, your loans have been in an administrative forbearance since summer 2024 due to the plan's legal challenges. You haven't been able to make payments, and your interest rate has been set to zero. This payment hold is temporary and could end soon. It's a good idea to explore other income-driven repayment plans so you can plan for your new monthly payment. You can use the US Department of Education's Loan Simulator to estimate your payments and check eligibility for specific plans. Read more: My Student Loan Payment Will Jump From $0 to $488 After SAVE Ends. Yours Might Too Earning less? Recertify your income A lot has changed since the first administrative forbearance in 2020, and if you're facing financial hardship or making less money than you were five years ago, you may want to apply to have your income recertified to potentially lower your student loan payment if you're on an income-driven repayment plan. To recertify your income, visit IDR application page and select "Recertify or Change Your Income-Driven Repayment Plan." Apply for the PSLF buyback program, if you're eligible The Public Service Loan Forgiveness program offers debt cancellation for teachers, nurses and other public service employees who work in a qualifying job for 10 years and make 120 payments on their loans. If you're enrolled in SAVE and were close to reaching your 120 total payments, the recent payment pause may have delayed your forgiveness. In this case, you might benefit from the PSLF buyback program. The PSLF buyback program lets you "buy back" months where your loans sat on hold during a forbearance period -- but only if doing so brings you to 120 total payments. For example, let's say you had already made 115 qualifying payments before your loan entered the SAVE Plan forbearance. You could apply for the PSLF buyback program to buy back five of the months where your loans were in forbearance to reach the 120-payment requirement. You'll apply for the program online, and once approved, you'll have 90 days to pay off what you owe for the number of months you buy back. So, if your monthly payment was $100, you'd need to pay $500 to receive forgiveness. You'll also need to make sure you meet all other PSLF eligibility criteria, such as working for a qualifying employer and having the correct loan type. If you think you're eligible and want to confirm your payment count, you can find qualifying payment amounts in your account. Expert tip: Note: Many borrowers have been waiting to find out the status of their PSLF buyback request, but it's still worth applying if you meet the requirements. Read more: More Student Loan Forgiveness Is on the Way for PSLF Borrowers. What's Next for Debt Relief? Pay off your interest while you're in school If you're still in college, your student loans likely haven't entered repayment yet. While it's difficult to predict what repayment options will be available in the future, there are proactive steps you can take now. One recommendation is to pay off any interest that accrues while you're still in school. Even small contributions can help reduce the overall cost of your loans in the long run. If your federal student loan hasn't yet entered repayment, you won't be eligible to enroll in a repayment plan. Repayment starts six months after graduation or if your enrollment drops below half-time, unless you enroll in another program, like graduate school, before the grace period ends. Read more: What's the Future of Student Loans and FAFSA if the Department of Education Goes Under? Don't count on student loan forgiveness Many borrowers have turned to income-driven repayment plans to reduce their monthly payments and potentially qualify for student loan forgiveness. However, forgiveness is not guaranteed, especially as legal challenges continue to threaten SAVE and some of the other IDR repayment plans. Programs like PSLF and forgiveness under the Income-Based Repayment Plan carry less risk, since they would require congressional action to be altered or eliminated. That said, it's always wise to plan for full repayment of your student loans, regardless of any current potential forgiveness opportunities.
Forbes
02-06-2025
- Business
- Forbes
5 Big Student Loan Updates After A Hugely Consequential Month
WASHINGTON, DC - MAY 22: U.S. Speaker of the House Mike Johnson (R-LA) speaks to the media after the ... More House narrowly passed a bill forwarding President Donald Trump's agenda at the U.S. Capitol on May 22, 2025 in Washington, DC. The tax and spending legislation, in what has been called the "big beautiful bill", redirects money to the military and border security and includes cuts to federal student loan forgiveness and repayment programs. (Photo by) The last several weeks have been hugely consequential for more than 40 million student loan borrowers, with some of the most significant updates in more than a year. And the impacts of these recent events could touch every aspect of student debt from disbursement to loan repayment and student loan forgiveness. Between court actions, legislation working its way through Congress, and regulatory updates, nearly every single federal student loan borrower may eventually be impacted by these recent changes. And for some borrowers, the consequences could be enormously costly. Here's a breakdown. The federal student loan repayment system may have never been in as much turmoil as it is today. At least eight million borrowers who had enrolled in the SAVE plan, a Biden administration income-driven repayment program, continue to be stuck in a forbearance due to an ongoing legal challenge over the future of the program. As a result, these borrowers have no payments due and their balances are not accruing interest, but they cannot make progress toward student loan forgiveness. This is true for both income-driven repayment plans, as well as Public Service Loan Forgiveness, or PSLF. Meanwhile, much of the rest of the IDR application system remains stuck in administrative uncertainty. The Trump administration had essentially shut down the entire IDR application system in February following a new court ruling related to the ongoing SAVE plan legal challenge. That action has had profound downstream effects for borrowers in other IDR plans that have nothing to do with SAVE, including those in IBR, ICR, and the PAYE plan. After a national teacher's union and student loan borrower legal group filed a lawsuit against the Trump administration over the IDR system shutdown, the Department of Education resumed application processing in April. But the department revealed in a court filing in May that more than 1.9 million IDR applications remain unprocessed, and less than 80,000 applications were fully adjudicated during the month of April. As a result, hundreds of thousands of borrowers have been unable to change their repayment plan or recalculate their monthly payments – options that the Department of Education is required to offer borrowers under federal law. According to anecdotal reports, loan servicers are first prioritizing IDR applications submitted by single student loan borrowers with a family size of 1, as they can be faster to process than IDR requests submitted by married borrowers due to additional complexities associated with those applications. But it is unclear if the Department's slow processing pace will accelerate. Another status report is due to be filed in less than two weeks. The Department of Education also revealed in the same court filing that only a fraction of more than 50,000 PSLF Buyback applications have been processed. Many of these applications have been sitting with the department's PSLF Reconsideration unit for six months or longer. PSLF Buyback is supposed to give borrowers an opportunity to receive credit toward Public Service Loan Forgiveness for certain past periods of deferment and forbearances, which usually cannot count toward student loan forgiveness under the program. The buyback program allows borrowers, upon approval, to make a lump sum payment equivalent to what they would have paid if they had been making qualifying PSLF payments during the period, provided that they were also working in qualifying public service employment at the time. Many borrowers who have been stuck in the SAVE plan forbearance, are pursuing PSLF, and are nearing their eligibility threshold for student loan forgiveness have been trying to utilize the PSLF buyback program to qualify for a discharge. But according to last month's court filing, the Department of Education has processed less than 2,000 applications out of more than 50,000 that remain in the queue. Department officials have provided no explanation for the delays, and have not signaled when – or whether – processing will accelerate. Another update is expected in two weeks. Meanwhile, last month House Republicans narrowly passed sweeping legislation that would fundamentally reshape the federal student loan system. The so-called 'One Big Beautiful Bill Act,' intended to slash government spending to offset the costs associated with massive tax cuts, would impact nearly every element of federal student aid including disbursement, repayment, and loan forgiveness. Under the terms of the legislation, the Graduate PLUS and Parent PLUS programs would be phased out or severely limited, which advocates have warned will force millions of families to turn to riskier and costlier private student loans, or forego higher education altogether. The bill would also repeal several popular student loan repayment plans including the SAVE plan, ICR, PAYE, and a newer and more affordable version of IBR. Borrowers who have been enrolled in these plans would be forced to change to a modified version of IBR that could result in much higher payments. One student loan borrower advocacy organization estimated that some borrowers could pay $5,000 or more per year in additional payments as a result. The bill would also create a new IDR plan that may be somewhat more affordable, but would add five to 10 years of additional repayment to a borrower's term before they would qualify for any student loan forgiveness, forcing many borrowers to remain in debt for 30 years or longer. The bill now heads to the Senate, where it may undergo further changes before the legislation can receive final approval from Congress. It would then be sent to President Trump for his signature. As Republican lawmakers in Congress take steps to remake the federal student loan system through legislation, Trump administration officials at the Department of Education are making moves to reshape key federal student loan forgiveness and repayment programs through regulatory changes. Last month, the department moved ahead with negotiated rulemaking, a lengthy process that would result in changes to federal regulations. The department is specifically targeting Public Service Loan Forgiveness in this negotiated rulemaking session. While administration officials have not expressly revealed what, specifically, they want to change about PSLF, most observers expect the department to try to enact regulations implementing President Trump's March executive order to cut off PSLF eligibility for organizations that engage in activities the administration deems to be 'illegal' or 'improper.' Some legal experts have warned that if elements of the order are enacted, it could unlawfully allow the administration to deny student loan forgiveness eligibility for organizations or government entitles that simply oppose the administration's priorities. The department's negotiated rulemaking process is also targeting the PAYE and ICR plans, two popular IDR plans that allow borrowers to make payments based on their income, with eventual student loan forgiveness after 20 or 25 years in repayment. As with PSLF, the department has not confirmed what officials want to change about these programs. But some observers expect the department to try to eliminate student loan forgiveness under these plans, based on a recent court ruling from a federal appeals court that questioned the programs' underlying legal authority. It is unclear what would happen to borrowers who reach the threshold for student loan forgiveness and then have the benefit cut off by the anticipated regulatory updates. Last month, the Department of Education also resumed collections actions against borrowers in default on their federal student loans. Such actions had been largely suspended for the last several years due to pandemic-era relief programs and associated extensions. In early May, millions of borrowers began receiving notices that they would be referred to the Treasury Offset program in the coming weeks. Treasury Offset allows the government to garnish the wages of federal employees, offset Social Security benefits, and intercept federal tax refunds. Starting as soon as this month, the Department of Education may initiate administrative wage garnishment proceedings, which would allow the government to seize a portion of wages from defaulted federal student loan borrowers working in non-federal employment. More than five million defaulted federal student loan borrowers are currently in the department's crosshairs. But that figure could double by the end of the year as hundreds of thousands of additional borrowers fall behind on their monthly payments. The department has said it is engaging in a robust communications campaign to notify borrowers of the coming risks, encourage them to get out of default, enroll in IDR plans, and pursue federal student loan forgiveness programs. But advocacy groups have warned that given the current turmoil facing many of these programs, a significant number of borrowers are going to fall through the cracks. And the financial ramifications could be enormous.
CNET
29-05-2025
- Business
- CNET
Your Student Loan Payments Could Soar if You're Enrolled in SAVE. Here's How Much More You Might Pay
Payments likely won't resume before the end of the year. But when they do, yours are likely to go up. Getty Images/CNET The Biden administration's Saving on a Valuable Education (SAVE) plan offered relief to millions of federal student loan borrowers. Under this income-driven repayment (IDR) plan, around 8 million borrowers would have seen their monthly payments capped at a portion of their income -- with roughly half of these borrowers owing $0 per month. But with SAVE officially struck down, your monthly payments are likely to increase if you're enrolled in the plan. "The payment is likely going to go up for borrowers enrolled in SAVE," confirmed Elaine Rubin, a student loan policy expert for Edvisors and CNET Money expert review board member. Experts don't expect the payment pause to lift any sooner than December of this year, and some predict borrowers won't be required to make payments until mid-2026. But regardless of when payments resume, you should be prepared to face higher monthly payments. How much more can you expect to pay? We did the math. What are my payment options when SAVE ends? With SAVE off the table, you'll eventually need to switch to another repayment plan. You currently have three other options for income-driven repayment: Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment. "Each plan has its own eligibility rules and repayment formula," says student loan lawyer Adam Minsky. "Many borrowers will have higher monthly payments under these plans compared to the SAVE plan." Alternatively, you could choose a plan that doesn't base payments on your income. These include the standard plan, graduated repayment and extended repayment. If you're enrolling in the Public Service Loan Forgiveness plan, you'll need to choose an income-driven repayment plan and not a standard plan. How much will my student loan payment increase? Most SAVE borrowers will see their payments increase on other payment plans, including IDRs. How much they might increase varies based on your income, household size and debt. To help you get an idea of how much your student loan payment might rise when the SAVE payment pause ends, I reviewed different options available for a single filer who makes $60,000 a year and has a $30,000 student loan balance at a 6.53% interest rate, using Federal Student Aid's Loan Simulator tool. Under SAVE, you would pay approximately $217 per month or less. Under other plans, you could see your payments rise from $70 to $370 per month. There are two situations where you could lower your monthly payment, but you'd be nearly doubling the amount you'd pay over the lifetime of your loan. Here's what it looks like. Income-Contingent Repayment The Income-Contingent Repayment plan sets your monthly payments to 20% of your discretionary income or what you'd pay on a fixed 12-year plan, whichever is less. Using the $30,000 loan example, here's what repayment would look like on ICR: Monthly payment: $290 Total to be paid: $43,919 End of term date: September 2037 If you qualify for PSLF, you'd pay $35,389 on this plan before getting your remaining balance of $7,884 forgiven in April 2035. Income-Based Repayment The Income-Based Repayment plan sets your monthly payments to 10% of your discretionary income if you borrowed loans after July 1, 2014. If you borrowed before that date, your payment would be set to 15%. This plan has a cap on payments — if your income increases, your payments will never be higher than what you'd pay on the standard 10-year plan. Here's what the payments on that $30,000 loan would look like on IBR: Monthly payment: $312 Total to be paid: $41,473 End of term date: August 2035 If you qualify for PSLF, you'd pay $40,259 on this plan before getting your remaining balance of $1,198 forgiven in April 2035. Pay As You Earn The Paye As You Earn plan sets your payments to 10% of your discretionary income. Like IBR, your payments on PAYE will never go higher than what they'd be on the standard plan. According to the loan simulator, your payments would be the same on PAYE as on IBR based on the $30,000 loan example. Monthly payment: $312 Total to be paid: $41,473 End of term date: August 2035 This is the last plan on this list that qualifies for PSLF. The forgiveness amount would be the same as the IBR plan. Standard Repayment The standard plan doesn't base your payments on your income. It gives you a fixed payment over 10 years. Monthly payment: $341 Total to be paid: $40,932 End of term date: April 2035 Graduated Repayment The graduated repayment plan has you pay off your loans over 10 years, too. However, payments start out lower and increase every couple of years. While your payment would start out lower, you'll see it jumps significantly over time. This plan is best for anyone starting out in a new career who expects to make significantly more money as they progress. Monthly payment: $196 - $589 Total to be paid: $43,916 End of term date: April 2035 Extended Repayment You can qualify for this plan if you owe at least $30,000. It has fixed payments and spans 25 years. You'd see a lower monthly payment with this plan, but since you're spreading out your payments over two and a half decades, you'll end up paying double the amount you borrowed. Monthly payment: $203 Total to be paid: $60,937 End of term date: April 2050 Note: The above payment options could change in the future. Republicans on the House Education Committee recently introduced a proposal that would eliminate many of the plans above for new borrowers and replace them with two options: a Standard Repayment Plan and a Repayment Assistance Plan. The standard plan would have fixed payments ranging from 10 to 25 years, while the Repayment Assistance Plan would base payments on a borrower's total adjusted gross income and waive monthly unpaid interest. Should SAVE borrowers refinance with a private student loan? Refinancing a loan can be helpful for creditworthy borrowers who can qualify for a low interest rate -- but experts generally warn against refinancing if you have federal student debt. Rubin doesn't recommend refinancing if you're counting on federal student loan benefits, working toward PSLF, enrolled in an income-driven repayment plan or living paycheck-to-paycheck. For most borrowers who were enrolled in SAVE, refinancing with a private lender won't make sense. "Even if you're comfortably making payments, if something were to happen, you might find yourself locked into a very challenging situation," Rubin previously told CNET. When you refinance with a private lender, you're giving up your federal student loan benefits. That means you won't qualify for financial hardship assistance, federal payment pauses, federal loan forgiveness or similar benefits. Once you've refinanced with a private lender, you can't reverse the process. How to prepare for a bigger student loan payment Borrowers in SAVE may not have owed any money on their student loans since March 2020 when the first federal forbearance period started. As SAVE makes its way through the courts, experts expect repayment to resume at the end of this year or sometime in 2026. Depending on your income and family size, that could mean fitting a sizable bill into your monthly budget. To prepare for that, Rubin recommends: Use the Department of Education's loan simulator to estimate the size of your monthly payment. Speak with a trusted, nonprofit source, such as Edvisors or The Institute of Student Loan Advisors, for advice on applying for and choosing the best repayment plan for your financial circumstances. Talk to a student loan advisor and an accountant about potential tax strategies to lower your adjusted gross income (used to calculate payments in some cases). Review your current finances to find places to cut or move costs (for instance, eliminating subscriptions, slowing other debt repayment or reducing your savings contributions).
