New Federal Loan Guidance ODs Need to Know
😵💫 Feeling lost in the whirlwind of student loan updates? You’re not alone.
This week the Department of Education updated their guidance around the SAVE plan situation, and there are important nuggets for anyone navigating repayment plans.
As an optometrist, I know you’re juggling patients, practice demands, and family life. So here’s a quick, no-nonsense breakdown of what’s staying the same, what’s changing, and how it could affect your game plan.
What’s Old with Federal Student Loans?
SAVE Plan in Forbearance:
- Still in forbearance due to court challenges—no payments or interest accrual for now.
- BUT: These months don’t count toward PSLF or taxable forgiveness.
- Loan forgiveness under PAYE and SAVE is paused, though forgiveness under IBR remains unaffected.
PAYE Plan Reopened:
- As of mid-December, PAYE is back! It could be a great option to consider, with its 20-year forgiveness timeline.
What’s New with Federal Student Loans?
IDR Forgiveness Payment Tracker Available!
- We've been waiting for two years, and it's here! The Department of Ed now added an IDR payment tracker to Student Aid's website! We've already had this for PSLF.
- Head on over, log in, and check out what they count toward loan forgiveness.
Timeline for SAVE Forbearance:
- The SAVE plan’s forbearance period is expected to last until Fall 2025, with payments resuming December 2025 at the earliest.
- Loan recertification dates for SAVE borrowers have been pushed back until February 2025 at the earliest, and services will notify borrowers of changes.
- I'm keeping in mind it's possible the incoming administration adjusts the timelines, but those are the facts we're working with at the moment.
PSLF Buyback Flexibility:
- They added a bit of extra language for PSLF borrowers - "In the future, borrowers will be able to buy back months even if they do not have 120 months of eligible employment."
- Assuming this is an offer they follow through on, this can allow borrowers to get the payments added to your count sooner rather than later.
IDR Applications Are Back:
- Applications for other Income-Driven Repayment (IDR) plans are being processed again! Be aware there may be a processing forbearance of up to 60 days, but those months will still count toward forgiveness.
Should You Switch Repayment Plans?
Here’s where things get interesting—and a bit complicated. Should you stick out the SAVE forbearance or switch to IBR or PAYE?
There's no perfect answer for everyone. In my opinion it's about trade offs.
If applying to switch IDR plans, you're going to need to recertify your income - which may lead to a higher payment based on higher income.
On the other hand, once you're on another qualifying IDR plan, your credited months toward forgiveness can start again without the SAVE uncertainty.
Though, it's possible down the road that these months in SAVE forbearance do get credited toward forgiveness. This is speculation, but it's possible.
So, you're potentially trading off:
- A bit more certainty (by switching and starting the payment count again) at a potentially higher cost, vs.
- Uncertainty with the SAVE outcome, though preserving the lower payment calculation and cash flow flexibility while in forbearance
You need to project out the different payment options, look at what the payments would be, and decide which trade off makes the most sense to you.
Some things I'm thinking through are:
🟢 If you're eligible for New IBR - a "new" borrower on/after July 1, 2014 - I prefer IBR over PAYE. New IBR is nearly identical and was created by law, rather than executive action. I feel it's much less likely to change.
🟢 If your payment will be substantially higher by switching out of SAVE, then I'm more comfortable waiting out the SAVE forbearance a bit longer. You may not have had to recertify income since COVID.
🟢 Especially under PSLF, where we may use the PSLF buyback for these months under a lower payment calculation.
🟢 If payments are calculated to be pretty close together, then you might prefer to switch and get the payment clock started again. Again, tradeoffs.
🟢 For older OD's that are only eligible for SAVE and Old IBR, it's a tougher spot. You may have no choice but to wait out the SAVE situation or choose a higher IBR payment.
🟢 Don't let these months of forbearance go to waste. Keep the same payment amount auto-deposited into a savings or an investment account.
🟢 As with all things, I'm keeping in mind the possibility that the PSLF buyback is changed in the future.
🟢 If you're planning to pay down the debt or refinance anyway, you're probably enjoying the $0 payment and interest months and putting those dollars into a high yield savings.
Hopefully those thoughts are helpful as you navigate this mess web of student loan changes.
If you’re not sure which path to take, don’t sweat it—I’m here to help. Reach out, and let’s work through your options together.
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