De-stress Your Life and Student Loans Before the Pause Ends
Required payments for your student loans are currently paused under the most recent “CARES Act” extension. The payment freeze is scheduled to end December 31st, 2022
TABLE OF CONTENTS
- Monitor your NSLDS for errors or discrepancies
- Ensure that you are in the best repayment option
- Determine if you qualify for additional assistance
- Keep Records
- Don’t rely on your loans to just “go away”
- This is your program, OWN IT
- Don’t blindly “trust” your Servicer
- Stay Informed
- Stay aware of ALL the discharge programs that are available
- Know Your Loans
- Don’t forget to review your IDR program
1. Monitor your NSLDS for errors or discrepancies – We feel this should be your #1 priority during this time. Servicers are exiting the industry and transferring your records to new servicers, leaving plenty of room for mistakes to be made. If these mistakes go unchecked, you could face a denial when you finally apply for loan discharge in the future.
2. Ensure that you are in the best repayment option before the payment freeze expires– When payments resume, your payment could be based on your 2019 income and household size, since that was the last time many people recertified their program. This means you may qualify for a lower payment now if your household size or income has changed over the last 3 years.
3. Determine if you qualify for additional assistance – With the numerous recent program updates and changes, there are many new benefits that people may qualify for including the PSLF Limited Waiver, Operation Fresh Start Program, and IDR back payments adjustments. Also, if you feel that you were a victim of forbearance steering, you may want to seek assistance immediately.
4. Keep Records – According to recent statistics, 98% of borrowers who apply for discharge are being denied. We believe this to be due to borrowers not keeping adequate records to dispute errors during their 10–25-year terms.
5. Don’t rely on your loans to just “go away” – There has been a lot of talk about discharging student debt all together, but until something is set in stone, you want to keep your loans current and in good standing.
6. This is your program, OWN IT – This means keeping up to date on all new regulation changes, program requirements and recent changes within your 10-25 year term. Not to mention having a firm understanding of how these programs work and how to stay compliant. Don’t just rely on your servicer to do everything for you with your best interest in mind. These are your loans and you will be the one responsible should something be done incorrectly on your file, whether it’s your fault or not. If you file a complaint with your servicer and it is not resolved to your satisfaction you can contact the Education Department’s Ombudsman Group
7. Don’t blindly “trust” your Servicer – Shockingly, up until 2021, Only 32 of the 4.4 million borrowers who had been paying for at least 20 years had their loans cancelled under IDR, according to a 2021 investigation recently discovered by NPR. The three main points brought to light are some servicers previously had no idea when borrowers qualified for forgiveness due to a lack of tracking, mismanagement of IDR programs has proved particularly damaging to low-income borrowers and large amounts of information continues to be lost when borrowers are transferred between servicers.
8. Stay Informed – At the same time the ED Dept is encouraging borrowers to rely on servicers, they are taking steps to address previous servicer misconduct which has caused numerous complaints, lawsuits and CFPB investigations. Verify all information that you receive from your servicer, several times to be sure it is accurate.
9. Stay aware of ALL the discharge programs that are available. There are many differences between forgiveness programs depending on the circumstances, employment, types of loans and several other factors of which you must stay informed. The types of forgiveness vary widely, and there are some lesser-known programs which exist, such as forgery discharge, false certification discharge, unpaid refund discharge, TEPSLF, discharge due to death, closed school discharge and discharge in bankruptcy.
10. Know Your Loans- It is possible to obtain forgiveness based on the types of loans you have:
- Parent Plus Loan Forgiveness. The income-driven plan known as Income-Contingent Repayment (ICR) is one method to obtain forgiveness for parent plus loans. Your monthly payments are capped at 20% of your discretionary income or the amount you’d pay on a fixed 12-year plan, whichever is lower. It also extends your payback period to 25 years, lowering your monthly payments. If you still owe money after 25 years of payments to have your Parent PLUS loans canceled, the remainder of your debt will be forgiven. If you receive relief in 2026 or later, when the student loan forgiveness provisions expire, your remaining balance will be dismissed, but it will be deemed taxable income. So, before you can wave goodbye to your Parent PLUS loans, make sure to budget for one last expense.
- Although the Federal Perkins student loan program is no longer accepting new applications, you may be eligible for Perkins student loan cancellation and discharge if you have old Perkins Loans from your college days. Borrowers who work in the public sector can choose this option. If you have Perkins student loans and believe you could be eligible for forgiveness, you should find out more about the PSLF program right away.
11. Don’t forget to review your IDR program -On IDR programs your monthly student loan payment is set at an amount that is supposed to be affordable based on your salary and family size in an income-driven repayment plan. There are four income-based repayment options:
- Income-Based Repayment Plan (IBR Plan)
The key difference between these two schemes is that IBR loan payments are capped at 10% of your discretionary income, whereas PAYE payments are capped at 10% of your adjusted gross income minus 150 percent.
- Revised Pay As You Earn Repayment Plan (REPAYE Plan)
- Revised Pay As You Earn (REPAYE) is a type of federal income-driven repayment plan for federal student loans. Through the REPAYE student loan repayment program, borrowers pay a percentage of something known as their “discretionary income” for 20 to 25 years, at which point any remaining REPAYE loan balance is discharged.
- Pay As You Earn Repayment Plan (PAYE Plan)
- The decision between PAYE and REPAYE is based on your financial circumstances, preferred repayment schedule, and whether you are married. For married borrowers, PAYE loan repayment programs are usually the preferable option, whereas REPAYE loan repayment programs are usually the better option for single borrowers.
- Income-Contingent Repayment Plan (ICR Plan)
- The Income-Contingent Repayment (ICR) Plan has monthly payments that are the smaller of (1) what you would pay on a 12-year repayment plan with a fixed monthly payment modified depending on your income or (2) 20% of your discretionary income, divided by 12.
Verifying that you are still enrolled in the best one for your current situation will ensure you receive maximum benefits.