Pathways For Repaying Students Loans

The days of being able to work part-time and afford the cost of college are sadly, long gone. With tuition having more than doubled in the last 50 years, individuals looking to gain a higher education turn to student loans. 

Total student loan debt in the United States currently amounts to over $1.77 trillion ‒ three times as much as it was 15 years ago. In August 2023, the Biden-Harris Administration announced the launch of the Saving on a Valuable Education (SAVE) repayment plan which is estimated to benefit over 20 million borrowers. As a way of making sure our members stay up to date with the resources available to them, we looked into the SAVE Plan and other student loan repayment options. For anyone looking to take a step towards paying off student loan debt, we hope this overview offers some direction and useful information.

More on the SAVE Plan

The SAVE Plan adjusts your monthly payment based on factors such as your income and family size. This plan lowers a vast majority of borrowers’ payments, unique to other Income-Driven Repayment (IDR) plans.

Some other benefits of the SAVE Plan include:

• Interest won’t build up on your student loan balance if you make your monthly payments. 
• Students who borrowed $12,000 or less will receive forgiveness after 10 years of payments, instead of 20 to 25 years.
• Many borrowers will see their payments cut by at least half, mostly benefiting those with undergraduate loans only.

For more information about the SAVE Plan, or to apply, visit StudentAid.gov/IDR.

Other Payment Plans

Aside from SAVE, there are other ways to tackle paying back your student loan debt in the form of Fixed Payment Repayment Plans and Income-Driven Repayment Plans.

The Standard Repayment Plan, Graduated Repayment Plan, and the Extended Repayment Plan are some examples of fixed payment repayment plans. Your monthly payment will be based on how much you owe, your interest rate, and the fixed repayment time period. According to Federal Student Aid, those leaving school will be automatically met with the Standard Repayment Plan, unless you specify a different plan.

IDR plans on the other hand, base your monthly payment on your income and family size. Some examples of IDR Plans include the SAVE Plan, Income-Based Repayment (IBR) Plan, and Income-Contingent Repayment (ICR) Plan. Those who satisfy payments on an IDR plan over a specific number of months get the chance to have their remaining balance of loans forgiven.

Check Your Eligibility

The majority of federal student loans are eligible for an IDR plan, and you can check eligibility requirements here. Something important to note is that the type of loan can affect your eligibility. Defaulted loans are not eligible for repayment under any IDR plan. There are ways to look into getting out of default on the FSA website.

Another option is consolidating your student loans, making it easier to pay off your debts. This process can help simplify your repayment if you are dealing with several loans with separate payments. A Direct Consolidation Loan can potentially offer more repayment plan benefits than your current status, but it’s important to be aware of the possible advantages and disadvantages a loan consolidation might offer before deciding on this method. 

Other programs like the Federal Family Education Loan (FFEL) Program PLUS Loans and Direct PLUS Loans for parents aren’t eligible for IDR plans. However, PLUS loan borrowers can become eligible for the ICR plan by consolidating their Direct PLUS Loans and FFEL PLUS Loans into a Direct Consolidation Loan. 

Be Aware of Loan Scams

Always be on the lookout for debt relief scams attempting to make unnecessary charges or steal funds from loan borrowers across the nation. 

Some ‘red flags’ to look out for indicating whether you are being targeted by a student aid scam can include:

• They ask for sensitive information like your username and password – The Department on Education will never ask for your FSA ID or password, which could give someone access to your personal student loan information and allow them to make unauthorized changes.
• They ask for up-front payment or monthly fees in exchange for their help – It is against the law to charge an up-front fee for debt-relief services before receiving any services. If you are asked to pay before a company has done anything, it is likely a scam. Free assistance is available through your federal loan servicer.
• They promise complete or immediate loan forgiveness/cancellation – The process for borrowers to receive loan forgiveness often involves a duration of qualifying payments and for those with than IDR, monthly payment amounts are set by federal law. Student loan debt relief companies can’t provide you with a “special deal,” so if any of the language sounds sketchy or too good to be true – it might be a scam!
• They want you to sign some form of written agreement or third-party authorization – A “third party authorization” or a “power of attorney” are written agreements that hand over a person or company the ability to contact your federal loan servicer and make charges to your account. In some cases, these companies cut off communication between you and your service provide so you don’t notice charges are being made on your behalf.
• They claim to be a part of the Department of Education or your student loan service – To seem legitimate, scammers will often pose as someone from the Department of Education. To handle business in relation to your student loans, you should stay on websites that end in “.gov” and always go through an official loan servicer.
• They are demanding, (in some cases, even aggressive), and pressure you to provide them with your information urgently.
• Spelling and/or grammatical errors in communication methods.

We want everyone to stay safe and aware when it comes to the reality of student loan debt relief scams. For additional information, you can check out the Federal Student Aid’s webpage on Avoiding Student Aid Scams.