Stuff of Nightmares: Paying Student Loans Again

Student loan payments resumed October 1st and horror stories are already flooding in, but this isn’t some Halloween trick, we’re talking real consequences for borrowers’ finances. Before repayment began, borrowers were already experiencing longer-than-usual hold times, but now the waits are staggering, sometimes hours long. Even worse, once borrowers get through to someone, they’re often given faulty information—which has become so dire that nineteen attorneys general have written a letter to the Biden Administration requesting that administrative forbearance be made available once again. And the reality for some borrowers is that—even after they make it through all these bureaucratic nightmares—they still won’t be able to afford their monthly payment.

What To Do When You Can’t Afford Your Student Loans

There are few things that keep us up at night more than financial woes—for some of us, there’s nothing scarier! Fortunately, there are more options for cash-strapped borrowers than ever before. The most dramatic is bankruptcy, which is gaining more and more traction as an outlet for student loan debt, but should only be used as a last resort. Another is to refinance your loans—perhaps with your spouse as a cosigner, for example—which could lower your payments. This, too, should be done only after serious reflection; refinancing can’t be undone and can extend your payment window, depending on how long you’ve been in repayment. Your loans, also, wouldn’t qualify for things like PSLF or IDR forgiveness. 

New Opportunities for Student Loan Borrowers to SAVE

If things like refinancing or filing for bankruptcy seem a little too extreme for you, you’re not out of options! The Biden Administration’s student loan reform efforts have added more opportunities for borrowers to save than ever, and you may even qualify for student loan forgiveness without even knowing it! If you’re on an Income-Driven Repayment (IDR) plan and have been in repayment for a long time, you may benefit from the IDR Account Adjustment, which will recount borrowers’ payments to make sure they haven’t been paying longer than they’re supposed to. Further, if you have loans—like FFELs—that were previously excluded from forgiveness, you can consolidate them into a new Direct loan and have the years you’ve already paid on them counted toward forgiveness. Like refinancing, however, consolidation is a permanent choice, and one that you only want to make when you’re sure it’s the right one to make.

Finally, borrowers can make even more use of the IDR system by taking advantage of the new SAVE repayment plan. This plan helps borrowers hold onto their cash by increasing the exemption for low-income borrowers, forgiving interest over and above your monthly payments, and (eventually) reducing the amount of discretionary income owed toward your student loans. This plan is being phased in over the next year, replacing the existing REPAYE plan, so it will take some time for all of its aspects to take effect. Borrowers who can’t afford to make payments on their current plan, however, are protected by the “on-ramp transition period” until October 1st, 2024. During this period, borrowers who are late or miss payments will not be considered in default, nor be reported to credit agencies as being delinquent. 

If the thought of paying your student loans is still making you cringe, give your student loan professional a call. We’re here to help you find your way out of the dark and toward a bright new path, free from your repayment woes!