GRAND RAPIDS, Mich. (WOOD) — Federal student loan borrowers have had a three-and-a-half-year break from making payments, but starting in October, that will no longer be the case. 

For those who have taken advantage of the forbearance, figuring out how to budget for payments again or even who your student loan servicer is now can seem overwhelming. Student loan consultants want to remind borrowers that they’re not alone and to take it one step at a time. 

“I think step one is to figure out where your loans are. That sounds kind of silly, but there was a lot of movement between servicers, like servicers moving to other servicers during the COVID forbearance,” said Meagan McGuire, senior consultant with Student Loan Planner. 

You can do this by logging into studentaid.gov, which is considered the hub for everything related to federal student loans. You’ll want to make sure your contact information is up to date, then you can confirm who your servicer is and start exploring different repayment options.

“I think you can filter yourself into a bucket when it comes to which repayment path you should go on,” McGuire said. “I think if your balance is greater than your income, then you should probably be thinking about an income-driven plan and pursuing loan forgiveness. If your balance is a lot smaller than your income, that means that you could probably pay it off in a decent amount of time, so a payoff strategy might be better.”

Many borrowers were previously on the Revised Pay As You Earn income-driven plan, also known as REPAYE. That has been replaced with the Saving on a Valuable Education or SAVE Plan. The U.S. Department of Education calls it the “most affordable repayment plan ever created.”

The full benefits of the SAVE Plan go into effect on July 1, 2024, but three important pieces will be implemented before the student loan payment pause ends. 

• Borrowers who earn less than $32,805 per year ($67,500 for a family of four) will not have to make payments.
• The Department will not charge any interest not covered by the borrower’s payment. This means anyone who makes a monthly payment, even if that amount is $0, will not see their loans grow due to unpaid interest. 
• Married borrowers who file their taxes separately will no longer be required to include their spouse’s income in their payment calculation for SAVE. These borrowers will also have their spouse excluded from their family size when calculating IDR payments.

Starting in July, the plan will cut payments even further. Instead of paying 10% of their monthly discretionary income, undergraduate loan borrowers will only pay 5%. Anyone in repayment is eligible to enroll in the SAVE Plan and anyone who was previously under the REPAYE plan will be automatically enrolled in SAVE.

McGuire believes people who should be considering SAVE are those who are already looking at loan forgiveness. 

“If you were going towards public service loan forgiveness or the income-driven forgiveness, then the SAVE plan could be appropriate because it’s cheaper than the other plans. The only thing you have to think about is the timeline. It’s 25 years to forgiveness if you have graduate school loans, 20 years for undergrad where the current plan PAYE, that plan is available to people who borrowed after 2007, and it’s a 20-year timeline. So, we’re doing a lot of comparisons between SAVE and PAYE for folks to see does the shorter timeline mathematically makes more sense than the cheaper payment for 25 years.”

McGuire added that this is something borrowers can discuss with a student loan consultant or with their servicer. However, she recommends doing as much as you can online first. 

“(The servicers) are already very overwhelmed. Their wait times right now are hours from what I’ve heard from clients, so if you could do anything yourself online, like you can apply for income-driven repayment on studentaid.gov without having to call. You can consolidate your loans, which just means combining them within the federal system, you can do that yourself on student aid dot gov as well. So there’s a lot of things that you could do on your own without having to call the servicer.”

In addition to implementing the SAVE Plan, the Biden-Harris administration is instituting a 12-month “on-ramp” to repayment, running from Oct. 1, 2023, to Sept. 30, 2024, so missed monthly payments during this period will not be considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.