Student Loan Update After Supreme Court - with Mike Foley

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We’re back once more with Mike Foley, CFP, CSLP, to bring us another update on the student loan saga. Unfortunately that forgiveness isn’t going to happen, but there are a lot of other changes upcoming… including returning to payments! Mike lays it out for us:

What are the major updates?

  • Student loans are back on - interest returning in September, with payments likely resuming in October.

  • No Biden forgiveness.

    • But no impact to PSLF rules, either.

  • New PSLF rules are active.

  • No more interest capitalization when changing repayment plans or enrolling.

  • New “SAVE” plan.

    • Replacing the REPAYE

    • Lowers the monthly payment by changing the discretionary income calculation.

      • No unpaid interest!

      • Able to file taxes separately from spouse.

      • Weighted average calculatoion for undergraduate and graduate loans:

        • 5% for undergrad

        • 10% for graduate

    • Will start later this summer.

      • Those on REPAYE will automatically switch over to SAVE

      • Married borrowers can file separately — unsure if this will recalculate payment adversely for some married borrowers.

        • Some spouses with higher loan balances could see increase in payments.

  • PAYE and ICR programs going away.

    • Tough break for those going for long-term taxable forgiveness and have loans pre-2014.

    • Also tough for those with high incomes and just a few years away from PSLF.

  • New “On Ramp” program

    • No defaults until Sept. 2024 — interest will still accrue, though.

  • Losing out on REPAYE, and then switching to IBR or PAYE strategy:

    • Limited to just 5 years on REPAYE/SAVE to get interest subsidies before losing out on being able to switch to a plan that can be done in 20 years like the new IBR or PAYE.

    • Those who have loans pre-2014 — need to switch to PAYE or forever hold your peace!

What should we do before loans turn back on?

  • Update your contact info at student aid.gov and with your loan servicer.

  • Link your bank account to your new loan servicer — likely changed during COVID.

  • Check your payment amount due on your loan servicer website.

    • Don’t just automatically rectify your income — earliest you need to rectify if already enrolled in a program would be 6 months after payments resume — so you may be able to make payments still based on your 2019 income!

Any loopholes to look out for?

  • Are you unemployed during the summer between residency/fellowship and your job?

    • May be a good time to re-certify while you’re unemployed.

  • Are you looking to pay off your loans?

    • May want to consider reporting lower income for a few years while you can, to take advantage of interest subsidies through new SAVE program.

  • Did you work for a qualifying PSLF institution prior to med school while you had undergrad loans outstanding?

    • Potentially able to consolidate loans and get PSLF or IDR credits, if you complete before end of year.

Getting in touch:

More info:

Disclosure:

Michael is a comprehensive financial advisor who runs his practice out of Scottsdale, Arizona, under North Star Resource Group. Michael was trained at Duke University and holds his Certified Financial Planner designation alongside his Certified Student Loan Professional designation. Although Michael serves a diverse group of clients with their financial and student loan needs, with two physician parents, Michael has found a specialty in working with those in the healthcare space.  Michael is a registered representative and investment advisor representative of Securian Financial Services. Securities and investment advisory services offered through Securian Financial Services, Inc. Member FINRA/SIPC. North Star Resource Group is independently owned and operated. 6720 N Scottsdale Rd Ste 290, Scottsdale, AZ 85253. Financial Professionals do not provide tax or legal advice and this should not be considered as such. Please consult a tax or legal professional for advice regarding your specific situation.