What to Know as Federal Student Loan Repayments Resume this Fall

Federal student loan payments are set to restart this October, with interest resuming in September. Despite the federal government implementing a 12-month “on-ramp” to protect borrowers from negative consequences of late and missed payments, the reality of repayment is beginning to settle in for the more than 40 million Americans with federal student loans.

Since payments were first paused more than three years ago, there have been major changes in the student loan space. A proposed debt relief plan was struck down by the Supreme Court, a new Income Driven Repayment (IDR) plan was unveiled, and the Public Service Loan Forgiveness (PSLF) program was revamped.

Here is what you need to know with payments set to resume.

Debt Relief Struck Down by Supreme Court

On June 30, 2023, the Supreme Court struck down the administration’s debt relief plan that was set to cancel 10-20 thousand dollars in federal student loans per borrower. The administration is now pursuing an alternative path to debt relief through regulation, though details are light at the time of this article. That process will begin this fall and final regulations are not expected for months.

While student loan cancellation has dominated headlines, borrowers will want to know about two other recent changes that could help them with repayment.

New, More Affordable Payment Plan for Borrowers on Income Driven Repayment 

The Saving on a Valuable Education (SAVE) plan launched on August 22, 2023. Historically, borrowers have encountered major challenges participating in and receiving forgiveness under IDR plans. SAVE simplifies the IDR process and makes payments more affordable for many borrowers. Below are some of the highlights of the new plan.

• Simplified application process that takes 10 minutes or less to complete and allows borrowers to link their IRS data for easy income verification
• Zero-dollar payments for undergraduate borrowers making less than $15 an hour
• Monthly payments cut in half for undergraduate borrowers compared to existing IDR plans
• Loan balances will not grow due to interest if borrowers make timely payments
• Early forgiveness starting at 10 years for low-income undergraduate borrowers
• Certain periods of deferment, including military deferment, will count toward forgiveness 

Those wanting to enroll in the SAVE plan can do so here. Borrowers already enrolled in the REPAYE plan will be automatically transferred into the SAVE plan.

You can find more information about SAVE in this breakdown from the Education Department.

Public Service Loan Forgiveness Revamped

In July 2023, new PSLF regulations went into effect that permanently improve PSLF. Prior to the new regulations, many PSLF borrowers encountered challenges certifying employment, having payments disqualified due to technicalities, and trouble with certain periods of deferment not counting toward repayment. The new rules make it easier than ever for borrowers to participate in PSLF.

Here are a few highlights from the new PSLF rules.

• Automated PSLF application process and employment certification for certain borrowers, including service members and veterans
• Credit toward forgiveness for late, partial, and lump sum payments where borrowers have certified their employment
• Credit toward forgiveness for time borrowers spend in certain types of deferment, including military deferment 

Borrowers can find more information about PSLF changes here.

Student Veterans of America participated in the rulemaking process for the new IDR Plan and PSLF changes. SVA served as the negotiator representing service members and veterans in the process leading to the new PSLF regulations and offered public comment on the new SAVE plan. We will continue to monitor these changes to ensure they effectively serve the needs of student veterans, service members, families, and survivors.

For additional information, the Education Department has specific resources available for those restarting repayment, those who will be making payments for the first time, and those concerned about defaulting on federal student loans.