There are ways to lower your monthly payments. From income-based repayment plans to an Illinois student loan ombudsman, here are some resources that can help.
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.
