As Student Loan Payments Resume, New Federal Relief Takes Shape
Friday, September 8, 2023
The pandemic-related pause on student loan payments is ending, and as Wisconsin borrowers resume efforts to chip away at their balance, they're urged to explore a new income-driven federal plan to lower their monthly bills.
Federal officials say more than four million Americans have already signed up for the program known as SAVE, which bases a borrower's repayment amounts on discretionary income. To date, more than 70,000 Wisconsinites are enrolled. The Biden administration said it will eliminate some debt completely, and others could save as much as 40% a month.
Robert Farrington, founder of The College Investor website, said it is aggressive in helping those overwhelmed with debt.
"There have been income-driven repayment plans for the last 15 to 20 years," Farrington pointed out. "However, none of them have offered payments this low, at 5% of your discretionary income."
Wisconsin officials noted if your debt is eventually forgiven, that portion of the balance would be considered taxable income. Payments are scheduled to resume in early October after a three-year hiatus. The Biden program was recently announced after a separate student loan-forgiveness plan was struck down by the U.S. Supreme Court. Opponents of the initiative have said it will burden taxpayers.
While roughly four million people have signed up, the Biden administration said more than 20 million could benefit altogether. Farrington added awareness might be an issue given all the student loan activity right now.
"Student loan repayments are just starting right now, and there's a lot of information coming at borrowers," Farrington cautioned. "Digesting it all, figuring out the best course of action, is very hard."
Another feature of the SAVE program is, for those who make their monthly payment, their loan balance will not grow due to unpaid interest. Certain elements of the initiative are being phased in. The website StudentAid.gov has details on which loans are eligible, and which are not.
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