Maximize Your Summer: Essential Steps for Student Loan Borrowers

Over the past few years, federal student loan borrowers have faced an overwhelming series of changes and updates. As tempting as it may be to tune out the noise and ignore the return of payments, doing so could be devastating. There are crucial, upcoming deadlines that borrowers must keep in mind. If you’re among the 40 million individuals with federal student debt, here are important dates and action items you should add to your checklist immediately.

New Employer Retirement Benefits for Student Loan Borrowers

■ Date

December 31, 2023

In late 2022, a significant retirement-savings reform package was passed, the SECURE Act 2.0. This introduced new benefits for workers with student loans and retirement plans. Traditionally, employers would “match” worker contributions to retirement accounts like 401(k)s or 403(b)s.

Now, employers can “match” on-time student loan payments by contributing an equivalent amount into a retirement account. This benefit also extends to payments made for workers’ spouses or dependents.

■ Why This Matters

With this new benefit, you no longer have to choose between saving for retirement and paying off student debt – You can effectively do both.

■ Recommendations

• Reach out to your HR department to see if they are implementing these new benefits.
• Even if your company does not currently offer this benefit, asking about it can initiate the conversation and show demand.

Expanded SAVE Repayment Benefits

■ Date

July 2024

This summer brings additional student-loan repayment benefits linked to the Biden administration’s new SAVE income-driven repayment (IDR) plan. Enrolled borrowers can have their monthly payments capped at 10% of their discretionary income— defined as income above 225% of the federal poverty line. For example, single borrowers earning less than $32,800 annually or families of four making less than $67,000 will have a $0 payment. Currently, about 3 million borrowers qualify for $0 monthly payments.

■ Other SAVE Benefits Effective in July

• More affordable undergraduate loan payments.
• Potential for loan forgiveness in as few as 10 years.
• Consolidating loans won’t affect progress toward forgiveness.
• Payment credit toward forgiveness during deferment or forbearance.
• Automatic IDR enrollment after missed payments.

■ Recommendations

• If you want to benefit from these changes, sign up for SAVE before July.
• Keep in mind that SAVE might not be suitable for everyone, particularly those with higher incomes, as it could increase your payments. Use the Education Department’s repayment calculator to determine the best repayment plan for you.

End of the Student Loan Payment On-Ramp

■ Date

September 30, 2024

The Biden administration’s “on-ramp” period, designed to help borrowers transition back into making payments post-pandemic, will end this fall. Missing student loan payments after this date will have more severe consequences.

■ Current On-Ramp Benefits

• The Education Department isn’t reporting missed or late payments to credit bureaus.
• Loans aren’t being placed into default or delinquency status.
• Borrowers aren’t being referred to collections.

(Outside of the on-ramp period, loans become delinquent after 90 days of missed payments and go into default after 270 days.)

■ Recommendations

• Continue making affordable student loan payments to get accustomed to regular, on-time payments by the end of the on-ramp period.
• If you suspect your credit has been incorrectly affected by missed payments during this period, check your credit report and contact the Education Department’s student loan ombudsman.

Prepare for Uncertainty

As the Biden administration continues to navigate the complexities of the student loan forgiveness plan, it’s crucial to prepare for the possibility that the new program may fall apart. The best strategy for your financial well-being is to proactively manage your student loans. Utilize the tools already available, such as the SAVE plan, other IDR options, the on-ramp period, the Fresh Start program, or existing student loan forgiveness plans.

By staying informed and taking advantage of these benefits, you can effectively navigate the challenges of student loan repayment this year. Provide yourself with relief instead of distress!