Recent legal developments have given student loan borrowers a chance to reassess and possibly change their repayment plans. Many borrowers are on the Save for A Valuable Education (SAVE) plan, but have been in forbearance due to ongoing lawsuits. These legal actions have caused a period of uncertainty, particularly for those borrowers hoping for loan forgiveness.
Alyssa Schaefer, chief experience officer at Laurel Road, a digital bank that provides student loan counseling and budgeting services, highlighted the issues that borrowers face when deciding whether to change their repayment plan. The main issue with continuing to use the SAVE plan during forbearance is that this period does not count toward a forgiveness period.
Those on the Public Service Forgiveness Loan (PSLF) program, for instance, often have a forgiveness period of 10 years, while those on income-driven repayment (IDR) programs may have periods ranging from 20 to 25 years. Borrowers are encouraged to assess their income growth potential, loan balance and lifestyle decisions when considering a repayment plan.
For example, if someone is in a career with high income potential but is not currently earning much, they should think about how future income will impact their student loan. They should also consider their lifestyle and life decisions. This includes factors such as marrying a high-income earner, which could increase the borrower's student loan repayment if they are filing taxes jointly.
Schaefer advises anyone considering a change of repayment plan to seek advice from an expert, as everyone's situation is different. She also stresses the importance of making considered decisions, not hasty ones, and thoroughly scrutinizing personal finances and available options.