The restart of student loan payments in October after one incredibly long hiatus has plenty of student loan borrowers looking for cover.
In Michigan, some 143,600 student loan borrowers already are set up to reduce their monthly payments through the brand new SAVE income-driven repayment plan, according to information released Tuesday by the U.S. Department of Education. The figure reflects both those who signed up on their own and those who were automatically shifted over from an earlier income-driven repayment plan, called REPAYE.
More than 4 million student loan borrowers nationwide already are enrolled in SAVE, according to U.S. Under Secretary of Education James Kvaal.
SAVE is designed, Kvaal said in a news media briefing Tuesday, so that borrowers can pay an affordable percentage of their income toward federal student loan debt.
In addition, the Education Department noted that it has received more than 1.6 million income-driven repayment applications since July 30 — and nearly 1 million of those applications are for the SAVE Plan specifically. The early beta test for SAVE applications began July 30 but the official launch was Aug. 22.
Many borrowers who make monthly payments under SAVE are expected to pocket more than $1,000 a year, compared with what they'd pay under other income-driven repayment plans.
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Expect a big push going forward to get millions more student loan borrowers researching their repayment options.
The pandemic-related payment pause, which began in March 2020, temporarily froze most federal student debt with a 0% interest rate. After repeated extensions, the pause — which was initially only to last three months — remained in place through much of 2023.
Interest resumed being charged on Sept. 1 on those federal student loans. Payments are due for borrowers on different dates in October. Borrowers should review their emails for alerts or go to StudentAid.gov to review their accounts for information on when their bills are due.
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Kvaal noted in the news media call Tuesday that a variety of efforts will continue to make sure borrowers "leave no potential relief for savings on the table."
The Education Department and loan servicers already have reached out directly to nearly 30 million borrowers to invite them to use the new income-driven repayment plan application to apply for the SAVE Plan.
An outreach campaign called "SAVE on Student Debt" has begun through a partnership with the Education Department and various grassroots organizations, including the NAACP, the National Urban League and the Student Debt Crisis Center.
Applications can take about 10 minutes or so to complete, if borrowers have their income accessed securely from the Internal Revenue Service. See StudentAid.gov/save.
Depending on your income, it's possible for some to pay more under SAVE than other repayment plans such as if they are single and making a good deal of money. It's best to review your own situation. "Total payments may be higher because it stretches out the term of the loan, especially compared with standard 10-year repayment," said higher education expert Mark Kantrowitz.
Millions of borrowers, though, will save good money under the SAVE plan.
Borrowers can tap into an online loan simulator at StudentAid.gov/loan-simulator to review various repayment options. See StudentAid.gov/save to study the details relating to the SAVE plan.
And you can learn more about all current options for federal loan forgiveness at studentaid.gov/forgiveness.
Borrowers applying for the SAVE plan or other income-driven repayment plans will see their new payment amount before submitting their application, according to the Education Department, and it will be displayed on their servicer's website when their first bill is sent. It's estimated to take about a month to process such applications.
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Most borrowers who apply for the SAVE plan, the Education Department noted, can expect their next payment to reflect their SAVE amount.
No income limit applies to the SAVE plan but the greatest reduction in monthly payments will be for those making $15 an hour or less and many borrowers making more money but supporting a family.
Currently, the Education Department notes, if you’re making $32,800 per year or less, roughly $15 dollars per hour, your monthly payment will be $0 if you sign up for SAVE.
Earlier, the Education Department said more than 1 million additional lower-income borrowers will qualify for a $0 monthly payment under the SAVE plan, including 400,000 already enrolled on the REPAYE plan. The idea is to help lower-income households free up cash for food, rent and other basics for daily life. SAVE replaces REPAYE or the Revised Pay As You Earn plan.
Any unpaid monthly interest on those federal student loans won't build up and trap you if you consistently make the required payments under the SAVE plan. About 70% of borrowers on income-driven repayment plans before the pandemic-related pause are expected to benefit from this change alone, according to the Department of Education.
Unlike other existing income-driven repayment plans, the White House notes in a fact sheet, a borrower’s loan balance will not grow as long as they make their monthly payments — even when that monthly payment is $0 because their income is low.
The Consumer Financial Protection Bureau, which has been critical of some loan servicers for making it harder for borrowers to access lower payments and seeing their loans forgiven, advises borrowers to understand what forgiveness and cancellation options continue to exist.
Borrowers under financial stress shouldn't panic in the next few months either. Avoid any outreach efforts, emails, or texts that suggest you need to pay an upfront fee for help researching or signing up for repayment options.
A temporary "on-ramp" to repayment will be in place from October through Sept. 30, 2024, to protect financially vulnerable borrowers who miss payments, including making sure those borrowers are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.
The CFPB warns that "this safety valve measure should not be used by servicers to delay assisting borrowers with their loans, and consumers should contact CFPB if they have concerns." If you have a problem with your student loan, you can submit a complaint to the CFPB.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor.
This article originally appeared on Detroit Free Press: Many Michigan student loan borrowers already signed up for SAVE plan.
