New hope for struggling student loan borrowers?

Your Weekly Advisor Update

A Note From Natalie:

Last week, the Supreme Court struck down President Biden’s student loan forgiveness plan, which means millions of student loan borrowers will have to begin repaying their loans in October.

In light of the ruling, The Department of Education has introduced a new repayment option to help those struggling—without interest ballooning. We dig into the new option below. 

Before student loan payments resume, make these new expenses part of your budget. If you’re not sure how much you owe, talk with your loan servicer. You can check who your loan servicer is through your Federal Student Aid account or by calling the Federal Student Aid Information Center at 1-800-433-3243.

Very best!

Natalie

Natalie Campisi

Senior Staff Writer

Consumer Finance

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan  

As millions of borrowers prepare to resume their student loan payments, there’s uncertainty and anxiety, especially for consumers who can’t afford these payments. According to the Consumer Financial Protection Bureau (CFPB), more than 1 in 13 borrowers are currently behind on their other payment obligations—higher than pre-pandemic levels—which suggests their struggles may increase when their student loan payments are added back into the mix.

In light of the ruling, the Biden Administration has announced new repayment initiatives to help struggling borrowers without digging their financial hole deeper. 

The Saving on a Valuable Education (SAVE) Plan is a new income-driven repayment option that can help borrowers with direct loans lower their monthly payments. The monthly payment amount is based on discretionary income—defined as the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline amount for your family size.

Borrowers making $32,800 or less ($67,500 for a family of four) will have a $0 monthly payment. Borrowers already enrolled in the REPAYE Plan will automatically be transferred to the SAVE Plan when it launches later this summer.

The biggest advantage of the SAVE Plan is that unpaid interest doesn’t accrue. For example, if $50 in interest accumulates on your loans each month, but you only have a $30 payment, the remaining $20 won’t be charged. That means struggling borrowers will no longer see their loan balances balloon to more than they originally borrowed. 

Struggling borrowers can also benefit from a new “on-ramp” period once the forbearance officially ends. For the next year, missed, partial or late payments won’t be reported to credit bureaus, put into default or sent to collections. However, missed payments during this time won’t count toward any loan forgiveness programs, and interest will still accrue for those not on the SAVE Plan. 

Follow our updates for more tips on preparing to resume your student loan payments.

Here’s what else you should know
this week:

More Than 37,800 Victims Of Student Loan Debt Relief Scam Get Cash Back 

Recently, tens of thousands of borrowers were conned out of millions of dollars in a student loan scheme. Here’s who qualifies for a payout.

2023 Student Loan Debt Statistics: Average Student Loan Debt 

From average balance per borrower to states with the lowest and highest student loan debt, here are the latest stats on student loan debt in the United States.

How To Watch Wimbledon In 2023 

If you want to get your mind off student loans and onto the court, we have the details on where and how to watch Wimbledon.

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