Student Loan Update July 2023: IDR Adjustment and onramps to repayment starting

Student loan update!

Even though the US Supreme Court struck down the first plan for forgiving some $10-20k of student loan debt, there are other things in the works for student loans worth knowing about

1 / IDR Account Adjustment is live

2 / SAVE will replace REPAYE in Spring 2024

3 / Your student loan bill turns back on Oct 3!!

4 / Onramps to help people get back into loan payment are available

1 / IDR Account Adjustment is a one-time program to get alllllll the payments people have made since 1994 counted, in order to live up to the promise that accounts utilizing income-driven payments would be forgiven after 20 years [undergrad] and 25 years [grad loans] but the administration of this promise was botched so terribly, that now all payments and deferment periods for federal loans, including the COVID pause years –  will count towards the forgiveness. Read a longer article here, or the government policy page here. 

2 / SAVE will be the new REPAYE and what those acronyms mean is: the cost to repay your loans will go down once SAVE launches in Spring 2024, when it reduces the total loan cost to 5% of your income – currently REPAYE is 10%, the lowest. This will especially help lower-income borrowers. The idea is, if the IDR adjustment doesn’t knock out your loan, this should reduce the payment until you can get it forgiven. A friendly reminder that this is designed to help lower-earners! For some of you, paying 5% of your income might be more than your current payment, and might pay off your loans before you can get forgiveness. Run your numbers!

3 / Your student loan payment  is due again starting Oct 1. Y’all I hope this is not the first time you are hearing this. You have two months to rearrange your budget to find the payment, and/or to set up a new payment plan you can afford. I’ve been recommending to people to put the amount you expect to be your loan bill to another goal or savings for a little bit, so that when you put it to the loan bill in Oct it’s not a shock. You still have time to try this!!

IN the meantime:

  • If you have moved, changed phone numbers, or have a new email address, log in to your loan servicer’s website to provide updated contact info.
  • Try out the new Loan Simulator [no login needed] to compare different payment plans: https://studentaid.gov/loan-simulator/; look at both total payments and monthly payments.

4 / There are some “onramps” – policies in the first year of payment starting back up – designed to help lessen the impact. “Although payments will be due and interest will accrue during the on-ramp period, interest will not capitalize until after Sept. 30 2024. In addition, during that period, borrowers won’t be reported to credit bureaus, be considered in default or referred to collection agencies for late, missed or partial payments.” [cite] So yeah you’ll owe the money for all your payments but you won’t immediately go into default and the interest wont create more interest you’ll then owe on.

If you or someone you love has student loans, here’s a few things to do:

  • Look at your income and your spending – where can you carve out money to put towards the loan payment? Might you need to bring in additional money? You know the difference between the money you can’t pull together, and the money you don’t want to pull together. If it’s about loan vs food, you need to eat [and use forbearance]. If it’s loan vs random amazon shopping, f*&k paying Bezos – get that shit paid down and in a program that will help you do it faster, so you can move on with life.
  • Look at your loan payment plan. You might need to choose a lower-payment plan to start, just to ease into paying. 
  • Compare the long-term impacts of the plan you are on. You might want an Income-driven [IDR] plan since it could qualify you for loan forgiveness *but* depending on your income, size of loans, and timeline, you might end up paying the loan off before you ever qualify for forgiveness. The official government site now has a Loan Simulator [no login needed] to compare different payment plans: ; look at both total payments and monthly payments.
  • Think about your timeline. If you’ve been paying on loans for more than 10 years, you might want to look into the IDR Account Adjustment program, to understand if you’ll get months of payment credited and maybe an IDR payment program is right for you, even if it wasn’t in the past, because you’re close to qualifying for 20 or 25-year payment forgiveness.

Here’s what I do NOT want you doing:

  • Ignoring your loans
  • Pretending you don’t have student loans
  • Not dealing with your loans

Trust me, I have been through student loan default and it is not fun. I don’t want this for you. The calls are daily and the payment plans are less flexible than if you just get in there and start chipping away with some kind of payment plan now.

If you had defaulted on your loans, there is currently a program – Fresh Start [gov site, explainer site] – to get you back in good standing, and get you into programs that could ultimately qualify you for forgiveness. But you have to sign up for it before the COVID pause ends, eg sign up in AUGUST and start to climb out of this hellhole. Ignoring your loans does not solve the problem and can add other problems like wage and social security garnishment [!] years down the road.

Engaging with your loans does not mean you absolve the system or even that you’ll ultimately pay them all, given the various programs getting going – it just means that you are going to reduce the stress on one aspect of your life.