Come October, federal student loan borrowers will be on the hook again to make monthly payments for the first time in three years after a pandemic pause.
With inflation, some borrowers are panicking. Adding to their anxiety: the recent U.S. Supreme Court decision overturning President Joe Biden’s debt-relief program, changing loan servicers and conflicting messaging from those servicers.
“I have not heard from my servicer at all on anything related to” the end of the payment pause, says Sabrina Calazans of the nonprofit Student Debt Crisis Center. “I know that folks from our team have actually received wrong telecommunications, telling them that they were in bankruptcy or something, and then got a follow up email saying, ‘Apologies, that was incorrect information.’ So there’s just a lot of miscommunication, misinformation swirling around out there.”
Here’s some advice from Calazans and others working to assist student borrowers on what you can do to prepare.
Don’t panic
For one thing, you might qualify for reduced payments or no monthly payments at all.
Borrowers can apply at https://studentaid.gov/idr/ for a federal Income-Driven Payment plan that caps monthly payments at 10% of their discretionary income. Experts encourage people to start applying now because processing the applications takes time.
Discretionary income is any earnings exceeding 150% of the federal poverty line. For 2023, that’s $37,500 for a family of four. Borrowers making less than that make no monthly payments. And, after 20 years of payments, any remaining debt will be canceled.
Under changes proposed by Biden and scheduled to take effect over the next year, the cap on payments would be lowered to 5% of discretionary income. The bar for that would be increased to 225% of the poverty level. Borrowers with less than $12,000 in federal student loans would have any remaining debt canceled after 10 years of payments.
Check Public Service Loan Forgiveness
Borrowers who have worked for nonprofits or government agencies might be able to get relief from student debt through the Public Service Loan Forgiveness program. also via the StudentAid.gov site. Eligible borrowers can get their federal loans canceled after 10 years of payments.
Under past presidents, applications for the program moved at a glacial pace and often were thrown out. The Biden administration has streamlined the process, allowing e-signatures and application-tracking.
Since October 2021, more than 615,000 people have had their federal student loans canceled through PSLF, with debt totaling about $42 billion. Under the Trump administration, about 7,000 borrowers received relief through the program.
The application still takes time to be processed, so it’s best to apply now.
Use Loan Simulator at StudentAid.Gov
It’s the choose-your-own-adventure book for student debt. The simulator has different portals: for borrowers struggling with payments, for those looking for the best repayment options and for anyone considering taking on additional student debt.
You can look for ways to pay off loans faster and to lower monthly payments.
Do not just ignore your loans
It might be tempting for some to bury their heads in the sand. But ignoring your loans won’t stop interest from accruing — and could cause it to balloon.
“It’s time to prepare,” says Kristin McGuire of Young Invincibles, a nonprofit that advocates for young adults. Interest “will get turned on in September,” McGuire says. “Your first payment will likely be in October.”
Identify your loan servicer
During the pandemic, a handful of major companies, including Navient and Granite State, stopped administering federal student loans. As a result, the federal Consumer Financial Protection Bureau estimates that four in 10 student loan borrowers will have to make payments to companies they might never have heard of.
McGuire advises borrowers to log onto their profiles at StudentAid.gov to find the name of the company now administering their federal student loans.
“Start checking in and ensuring that you understand how much you owe and when your payments will be” due, McGuire says.
Update your contact information
Get in touch with your loan servicer to make sure it has your latest contact information. Update your details on your StudentAid.Gov profile, too. That will increase the likelihood you receive communications about your loans — including information on when your first payment is due.
“What we’ve been telling borrowers is to make sure that everything looks good on their account,” Calazans says. “To make sure that, if there are communications being sent to them, that they are receiving them and are being made aware of any changes. Especially with so many servicers changing, so many people being assigned a new one, it’s critical that folks know what is going on when it comes to their account.”
Get help
Are you struggling to understand communication from your servicer because it’s littered with acronyms? This glossary of financial aid terms from the federal education department — at https://shorturl.at/azQYZ — might help.
Or maybe your servicer is saying you owe money even though you qualify for no monthly payments through an income-driven repayment plan. Maybe you’re not sure how you’re going to cover your monthly loan payment when you also have rent to make and a family to feed.
A few states, including Illinois, have student loan ombudsmans McGuire says borrowers can reach out to for help.
“There are also really great advocacy organizations who are trusted organizations,” she says, “like the Student Debt Crisis Center or the Student Borrower Protection Center, who can give timely and accurate information to consumers and borrowers.”
Check these at https://studentdebtcrisis.org/ and at https://protectborrowers.org/
Commiserate with others
Living with student debt can be isolating.
Ami Schneider, a student loan borrower from Schaumburg, says she felt that way when she graduated from college and bill collectors were calling her constantly.
“I remember how hopeless I felt, how desperate I felt, how just depressed I was,” Schneider says. “I felt like I was a burden on my family. I started having all of these internal dialogues with myself, where I started shaming myself for that debt. And it really became a very isolating sort of feeling.”
That feeling lessened, Schneider says, once she found a community of borrowers — first online on Reddit, then in person when she joined The Debt Collective, an organization of student debt activists. She’s now an organizer with the group, which can be found online at https://debtcollective.org/.
“When I found out that it wasn’t just me and started actually organizing with other debtors, that made me feel hopeful,” she says. “That made me feel like we can do something about this.”
