Your Top Student Loan Questions Answered
Hey, that’s a great question. I don’t know if you saw my video from a couple days back, but a lot of people get scared when they get that letter, and that letter says their payment for 12 months, and then it jumps up significantly for the next 12 months. And the key is, Our Cornet, you have to recertify your income every single year.
And so you’re going to get a letter at about the nine or ten-month mark, and it’s going to say you need to submit your new income documentation and show what your income is. And so you do that on time, and they will recalculate your payments, and then the next 12 months will be based on whatever your payments are at that given time.
So, don’t get super freaked out about that letter. If you haven’t seen my video, I mean it’s maybe like five days old at this point in time, and I walk through exactly what that letter means and what you should do.
You should definitely get on an income-driven repayment plan if you’re not, and then what’s your payment, and what are we trying to close on that gap?
Well again, it’s all your repayment plan. So, is it correct, number one, what repayment plan are you on? Are you on IBR, are you on PAYE, are you going to look for the RAP plan?
Part two is, is it correct? Did you certify your income? Did you end up defaulting back to the standard repayment plan? Is it valid? You know, we have our student loan calculators here so you can understand what your payments should be.
But when I see that and people are like, “I didn’t know I needed to recertify” and whatnot… so. Hey Sherry, thanks for all the hearts, I appreciate it.
I mean, that doesn’t really seem like that big of an issue. It’s kind of weird though. Was there an actual technical issue that is impacting you for the school that you’re trying to go to? I’m curious on that one.
Leslie, what income-driven repayment plan or repayment plan did you choose? It also might be that that ending payment is like a little half-month, or like you’ve paid for, you know, 239 payments, and then the 240th is just a little half one because of math.
So… Oh! Graduated payment, that is confusing. So Leslie, I will give you my warning that I give to everybody on the Graduated Repayment Plan. A lot of people are seduced by it. They’re seduced by it because when they put the numbers in the loan simulator or any calculator, it has a low payment today.
But I will tell you that nobody—well not nobody, like literally less than 0.1% of people—finish paying their student loans on the Graduated Repayment Plan. And this is why I call the Graduated Repayment Plan the actual trap. So, you start low and then it gets higher, right?
And by the time you get four years in or six years in and your payments are rising, you start to realize that this is going to be a problem financially. And at that point in time, you’ve already been on this plan for four or six years, and you could have been on Income-Based Repayment or the Repayment Assistance Plan.
Which might have given you maybe a slightly higher payment upfront, but it’s going to definitely give you a lower payment once that graduated plan rises. But you have lost four or six or eight years of time that you could have been accruing towards loan forgiveness, right?
The IBR plan is 20 years for new borrowers. The Repayment Assistance Plan will be 30 years. But you lost six years, eight years, whatever it happens to be, until you get to that point in time. And so I really, really don’t like people getting in the Graduated plan.
It’s deceptive and people really get injured financially on it. Just they don’t get injured financially year one, they get injured financially year six, year eight, somewhere in there. And I’ve seen this story hundreds of times, Leslie, so don’t be seduced by that low payment. Like, maybe take the IBR payment that might be 20 dollars, 40 dollars a month more today.
I have not heard of any of this issue with FAFSA, Edilberto. I would be concerned on making sure that your information is updated, your passwords are updated, you can’t see your information. It’s all very interesting. I would also make sure you’re checking the right year of the FAFSA. Are you pulling up 2025, 2026, 2027 school year? Like just make sure you’re in the right page of the Federal Student Aid website.
So Morena, that is a placeholder date. It’s not going to apply to you. No one is going to stick into it until November of 2028. In fact, the plan officially dies well before then. You’re going to have to choose a repayment plan within 90 days of July 1st, depending on what your individual timeline is. You should plan on changing repayment plans in July, August, or September. So, you’re not going to be able to wait that long, Morena.
User, I think it’s important to realize that Parent PLUS loans are your loans. Your son has no legal obligation to it. And so when you say he defaulted on it, I just want to make sure you understand that you defaulted on it, not him.
And he’s not legally required to pay it, to do anything with it. It is your loan. With that being said, because you’re in default, you have two options to resolve the default. Well, you really have three options. Pay it off. If you wanted to, you probably would have done that one already. The other two are consolidation and rehabilitation.
Rehabilitation allows you to make nine payments that are going to be income-based at 15%. And then once you make those nine payments, they’ll remove the default from your credit and you can re-enroll in an income-driven repayment plan. Rehabilitation is really nice because it removes that default.
It will allow you to qualify again for Federal Student Aid, it will allow you to get like an FHA loan, things like that that you’re prohibited to by defaulting on federal debt. If you don’t care about those things and you just want the fastest solution, consolidation is the fastest solution. You consolidate your Parent PLUS loan, in 30 to 45 days you will be back in a repayment plan.
Hey, great question, Firefly. And the answer is yes, because they’re separate things. So I always call your income-driven repayment plan your repayment plan. And you gotta certify your income every year.
I like to call PSLF the sidecar. So it runs alongside your repayment plan, and that one you’re certifying your employment. And then IDR plans you’re certifying your income. The income and your repayment plan of course is the one that like is super important, but your PSLF employment certification—it’s important for PSLF, but they’re separate things.
Well, I don’t know about the best for you, but you have three options. You have the Standard plan, you have IBR, you have RAP. We have our calculators linked in bio and you can go run the numbers and understand.
SG Tom, that’s a placeholder date. If you’re in the SAVE forbearance, you’re not going to be in it until November 2028. They’re going to start sending notices on July 1st, and you’re going to have 90 days from your notice.
And you can watch my video today, I share more, and then you can listen to our podcast that we just dropped today as well with the Undersecretary of Education, where we walk through what that timeline is going to look like for borrowers.
Yeah, that’s just a glitch, Sarah. I think it’s mostly resolved at this point in time, I haven’t seen anyone with it. I wouldn’t even worry about it.
I would make sure that you know what your payment plan is supposed to be by running your numbers, and if your actual payment plan when it posts is significantly different from what it’s supposed to be, then I would call and figure out what’s going on. Just because you got that initial 50 dollar letter—most people get like two or three letters when they enroll in repayment plans.
Yeah Lavonne, so congrats first off, I think we should give Lavonne a cheer because paying off loans is fantastic. Part two though is you want to call your loan servicer and you want to request a payoff date. And you want to request that payoff date for, I don’t know, let’s just say that you’re trying to pay it off this week.
I would request a payoff date for June 30th. Like a couple weeks out. Because interest is accruing on your student loan every day, and let’s just say you like submit that deposit today, by the time it clears, you might have had another seven dollars added to your loan, and then you just get in this vicious cycle of trying to pay off like ten dollars here, twenty dollars here.
And you never get done. My recommendation is to choose a payoff date a couple weeks out, make the payment well before that payoff date, and then you just get a refund check in the mail for like 20 bucks. And that way you know your loan is paid off. Yeah, you’re waiting on a refund check for like twenty dollars, but like whatever, at least you’re paid off. So congrats Lavonne.
So SG Tom, there’s a ton of student loan forgiveness programs out there, but they require you to do something, and none of them are based on your degree, right? 75% of Americans don’t work in the field that their degree was in. That’s just basic stuff, right? So some of the most popular programs, right, are Public Service Loan Forgiveness, Teacher Loan Forgiveness.
Time-based loan forgiveness tied to your repayment plan. You also have like the death and disability discharge, really total and permanent disability discharge. You have a bunch of states that offer state-based student loan repayment assistance for working in certain fields or taking certain actions. You have employers that are offering student loan repayment assistance programs.
So there’s a lot of options there, Tom, and I think a lot of Americans feel the same way—their degree really is worthless, and the stats kind of show that 75% of people don’t even use their college degree when they’re said and done.
So Leslie, it’s that’s a tough spot. So you kind of have to just do some math right now and decide what can you afford and what your goal is. You know, you’re 40 payments away from PSLF, so what, three and a half years, a little, almost four years, twelve, twenty-four, yeah, that’s right. Do you change jobs and go do that? Or do you just start focusing on repayment?
Maybe your current job, you know, paid you so much better than your public service job, and so you are, you know, like in a better spot. But it really kind of just depends on what your goal is, and this is where like the financial planning piece comes in, of you’re trying to minimize your total student loan payments until you’re done, while you’re also trying to build wealth.
And so I don’t know what your holistic financial situation looks like, but really I would just sit down and do the math, and one, also understand if you can afford that 614, 686, 941, whatever it is you decide on doing, right? But if you’re not going for loan forgiveness anymore because your situation has improved, it’s repayment time.
Well, I don’t know about the best for you, but you have three options. You have the Standard plan, you have IBR, you have RAP. We have our calculators linked in bio and you can go run the numbers and understand.
SG Tom, that’s a placeholder date. If you’re in the SAVE forbearance, you’re not going to be in it until November 2028. They’re going to start sending notices on July 1st, and you’re going to have 90 days from your notice. And you can watch my video today, I share more, and then you can listen to our podcast that we just dropped today as well with the Undersecretary of Education, where we walk through what that timeline is going to look like for borrowers.
Yeah, that’s just a glitch, Sarah. I think it’s mostly resolved at this point in time, I haven’t seen anyone with it. I wouldn’t even worry about it. I would make sure that you know what your payment plan is supposed to be by running your numbers, and if your actual payment plan when it posts is significantly different from what it’s supposed to be, then I would call and figure out what’s going on. Just because you got that initial 50 dollar letter—most people get like two or three letters when they enroll in repayment plans.
Yeah Lavonne, so congrats first off, I think we should give Lavonne a cheer because paying off loans is fantastic. Part two though is you want to call your loan servicer and you want to request a payoff date. And you want to request that payoff date for, I don’t know, let’s just say that you’re trying to pay it off this week, I would request a payoff date for June 30th. Like a couple weeks out.
Because interest is accruing on your student loan every day, and let’s just say you like submit that deposit today, by the time it clears, you might have had another seven dollars added to your loan, and then you just get in this vicious cycle of trying to pay off like ten dollars here, twenty dollars here, and you never get done.
My recommendation is to choose a payoff date a couple weeks out, make the payment well before that payoff date, and then you just get a refund check in the mail for like 20 bucks. And that way you know your loan is paid off. Yeah, you’re waiting on a refund check for like twenty dollars, but like whatever, at least you’re paid off with your student loans. So congrats Lavonne, that is phenomenal, and hope that helps.
So SG Tom, there’s a ton of student loan forgiveness programs out there, but they require you to do something, and none of them are based on your degree, right? 75% of Americans don’t work in the field that their degree was in. That’s just basic stuff, right?
So some of the most popular programs, right, are Public Service Loan Forgiveness, Teacher Loan Forgiveness, time-based loan forgiveness tied to your repayment plan. You also have like the death and disability discharge, really total and permanent disability discharge.
You have a bunch of states that offer state-based student loan repayment assistance for working in certain fields or taking certain actions. You have employers that are offering student loan repayment assistance programs. So there’s a lot of options there, Tom, and I think a lot of Americans feel the same way—their degree really is worthless, and the stats kind of show that 75% of people don’t even use their college degree when they’re said and done.
So Leslie, it’s that’s a tough spot. So you kind of have to just do some math right now and decide what can you afford and what your goal is. You know, you’re 40 payments away from PSLF, so what, three and a half years, a little, almost four years, twelve, twenty-four, yeah, that’s right. Do you change jobs and go do that?
Or do you just start focusing on repayment? Maybe your current job, you know, paid you so much better than your public service job, and so you are, you know, like in a better spot. But it really kind of just depends on what your goal is, and this is where like the financial planning piece comes in, of you’re trying to minimize your total student loan payments until you’re done, while you’re also trying to build wealth at the same time.
And so I don’t know what your holistic financial situation looks like, but really I would just sit down and do the math, and one, also understand if you can afford that 614, 686, 941, whatever it is you decide on doing, right? But if you’re not going for loan forgiveness anymore because your financial situation has improved that much and your loan balance has continued to shrink, it’s repayment time, and your real math goal is to minimize your total cost.
Honestly, that’s a big math question, Edilberto. We have a FAFSA calculator, and you can go calculate your estimated SAI. It’s been updated for the 2026-2027 school year. So you can go put all your information in, add the extra kid, you can see what your SAI is going to be. My personal guess is it’s probably not going to change extremely much from this year, but it should give you a little lower SAI as a result.
Johnny, this is the most interesting question to me in the personal finance space because you have the two camps, right? You got the loan forgiveness camp over here, which is about 50% of folks, and you got the repayment camp over here, which is about 50% of folks.
And with that in mind, most people that are at a zero or low-dollar pay payment are trying to maximize loan forgiveness. I don’t know where you’re at in your timeline, Johnny. How many more years you have, and what your future payments look like, because you said you got it when you had low income, and now maybe you have a lot of income.
I don’t know. If your goal though is forgiveness, you do not pay extra on your student loans. And instead, you look at ways to lower your Adjusted Gross Income. You could do that through contributing to a traditional IRA, a 401k or 403b, an HSA, and you want to make sure you’re debt-free and you’re investing in building wealth for yourself.
That way when you get your loan forgiveness, not only are you getting your loans forgiven, but you’ve built up a little nest egg along the way. With that being said, if your financial situation has turned for the better, and you’re in the camp of, “My pay payment’s going to rise significantly and I’m making good money,” then the debt snowball is a fantastic approach to getting debt-free. […] Hey, so Johnny, yeah… good, I see your follow-up question. “Should I switch over to traditional to lower my AGI?” Yeah!
So those Roths are not helping you. They’re not helping you with your student loans, and they’re not helping you maximize your loan forgiveness. So I would definitely be doing Traditional to lower my Adjusted Gross Income, to go from there.
That’s not any type of grounds for getting your student loans forgiven, Dr. Big Spoon. Colleges change their programs all the time. That doesn’t mean that you necessarily were defrauded. So the general category that you are thinking about I think is called Borrower Defense to Repayment. Borrower Defense to Repayment requires that you personally were defrauded by your school when you enrolled in said school.
I will tell you that statistically zero public colleges have ever had any borrower defense claims succeed. So if you’re talking about a public college, the answer is you’re never going to get that. If you went to a for-profit college, you have a higher chance. And if you went to a private non-profit, it’s not quite zero, but it’s pretty darn close to zero. With that being said, you need to bring the proof, you need to show that you enrolled in this program and they misled or defrauded you, and simply closing departments or changing majors or their offerings doesn’t mean that you personally were defrauded by your college.
Firefly, great question. So PSLF Buyback uses your income for the calendar year that you are trying to buy back. So this is one of the reasons why I’m actually not a huge fan of Buyback. I think most people are not going to see a huge benefit from it, and a lot of people have cost themselves so much time waiting for Buyback.
When they likely would have been done with their loans forgiven already, and probably at a lower cost than what they were trying to buy back at. So if you were to buy back for 2024 and 2025, they’re going to ask for your tax returns for 2024 and 2025, and you’re going to show your tax returns, and they’re going to calculate your payments based on IBR or PAYE.
Here’s why it’s more expensive: If you would have just listened and enrolled in 2025, you would have actually been able to use your 2024 tax return, which could have been based on your 2023 income, to actually just make your payments under IBR. But now they’re going to use your 2025 income in 2025. You’re going to pay more for Buyback. Most people are going to finish normally before they get their application processed.
Yeah, so that’s one of the big frustrating things that the RAP plan is trying to solve, right guys? So the new Repayment Assistance Plan, I know a lot of people are like, “30 years?!” Yeah, the 30-year part sucks. But the part that doesn’t suck is the no negative amortization.
So as long as you make your full payment every month, even if that payment is $10, your loan balance will never grow. They will consistently waive the unpaid interest every month. Then they also have the principal matching subsidy. So they will match up to 50 dollars a month, so if your payment doesn’t go to principal at all, you will get your principal reduced.
Which is really cool. I will say, if you actually were going for PSLF, Leslie, like you figured out how to finish it, who cares? Right? It’s just… this is like the worst case scenario where you don’t finish under PSLF, and now you owe more as a result. That’s where it’s like, I don’t know the whole story, Leslie, but I would be looking for PSLF eligible employment because I would view it as a bonus.
Hey, great question, Mitch. So when you sign up for your Parent PLUS loan, you make a decision. You make a decision to defer the loan while in school or to enter repayment immediately. With that being said, if you defer the loan in school, you can still make additional payments on the loan and pay off the interest as you go. It’s not going to be a set monthly thing, but you are more than welcome to.
I would encourage you, as a personal finance person that is trying to help you be wealthier… I would pay the loans while you’re in school. These are your loans. You are borrowing under the new rules, so there are no income-driven repayment plans, there are no Public Service Loan Forgiveness options.
Like, this is as straight of a loan as you’re ever going to get, so it’s like it’s only going to cost you more money to defer while you’re in school. And Mitch, you better not tell me you’re asking your child to pay it. Because like, that would break my heart. You don’t want to take money from your 22-year-old when they need it the most in life. When I’m guessing you’re in your 50s or 60s and you’re venturing towards retirement.
Have we figured out if the PAYE plan will or won’t be available after July 1st?
KMF, great question. And so Jay, the student loan lawyer, made a great video on this, and I have asked everybody, and everybody has a different opinion on it. So this is my spiel about it. StudentAid.gov clearly says you have until July 1st, 2027. That’s what StudentAid.gov says. However, the final rules that go into effect on July 1st, 2026, clearly say that PAYE is not an eligible plan.
Moving forward. Like many things, the question becomes, what is the Department of Education going to enforce, what are their loan servicers going to do? Maybe they follow what they have on StudentAid.gov and allow you to go until July 1st, 2027. Maybe they require you to be enrolled in it by July 1st, 2026. My take here is, if PAYE is where you want to be, you should just be enrolled in it right now.
You’re literally splitting hairs over maybe two months of payments here at this point in time, because you’re gonna have to choose a new repayment plan in July or August… yeah, you can put push it to September. But also if PAYE is that beneficial to you, it ends at the end of 2027/early 2028. The official deadline is June 30th, 2028.
But what we are hearing is that you’re going to start getting notices just like we’re getting for SAVE at the end of 2027 and early 2028, and if you don’t make a choice, they’re going to default you to Standard. So if you’re waiting that long, you’re not going to be able to stay in forbearance. Just get enrolled in the plan.
No, so we’re a news and media organization, and I love it. And as much as I’d love to help you, it’s not what we do here at The College Investor. I talk about the news, and I share what you need to know. However, I know a few folks that you should talk to if you’re interested in it. If you are interested in the financial planning side of things—because you’re a high-net-worth person—check out the team at the Student Loan Planner.
They’re CFPs, they’re literally fiduciaries, and they will put together a financial plan that works for you. If you are on the other side of the spectrum with like, “I’m gonna get sued by a private lender, I’m thinking about bankruptcy, I’m overwhelmed with my debts,” check out Jay the Student Loan Lawyer. He is a lawyer that specializes in bankruptcy and student loans. I’ve known both of these folks for 15 years now.
They are real humans with real businesses, and they are really good at what they do. With that being said, if you are in the middle, there’s not a lot of options. I think that’s the one thing that people think there’s all these choices. You got IBR, RAP, Standard. It’s not as much option-driven as it’s ever been.
So with that being said, the general answer is for federal student loans, it’s an absolute no. But I’m going to put an asterisk there. You will never settle for less than you borrow, Miss Mary, for federal student loans.
There are things that the Department of Education will negotiate on. But all of them still leave you worse off, and you have to have been in default in collections. There are scenarios where they will waive the collection costs.
There are scenarios where they’ll waive 50% of the collection costs. And there are scenarios where they’ll settle for 90% of the whole pie of your principal, interest, and collection costs, and they’ll make it 90% of that.
They only get there when it’s like you’ve already been in default and destroyed your whole life financially. Private student loans are very similar.
They’re never going to settle unless you’re currently in default and you’ve likely already been sued. Once you’re sued, they might negotiate with you because they’re trying to not pay lawyers and they’re trying to see what they can get out of it for you. Again, you’re only getting sued because you’ve not paid your private student loans forever, and they’re coming after you. So technically you can, but like you’re actually worse off by trying to do that, so I don’t recommend it, Miss Mary.
So Jeff, it’s not that you make too much for IDR, it’s that you already have to have been consolidated to enroll in IDR. IDR will always be the lowest except for the first few years of the Extended Graduated Plan. And so Jeff, I don’t know if you were at the beginning of my live when I talked to that other person in this chat… I hate the Graduated plan.
I hate the Extended Graduated plan even more than the regular Graduated plan. It is a seductive trap. And what I mean by that is, remember the Graduated plan hockey sticks. It goes like this, right? And so you think you’re doing okay on this low side of the hockey stick for four years, six years, all the different things. But then the payments start rising. And you’re like a frog in a pot, right?
And you’re gonna start boiling and you’re just gonna start getting in trouble. And you’re going to start looking for other options. And the problem is, is moving forward after July 1st, Parent PLUS loans have no options if they’re not consolidated, right? You only have the Standard repayment plan. If you are consolidated, you at least have Income-Driven Repayment.
Which is ICR and IBR. And there’s no cap anymore, there’s no partial financial hardship requirement to enroll in that. And the cap on IBR is the Standard plan, so like you’re always better off in IBR than the Standard plan. The problem is, is six years, eight years down the line when that payment gets too high, you’re going to look to switch. But you’ve basically lost years towards forgiveness.
Under IBR, which is very frustrating. And so by the time you do switch, you’ve lost all that time. Part two is moving forward, by the time you switch, you’re not going to have these inexpensive options anymore. So Jeff, I don’t know if you’ve consolidated or not, but I would really recommend getting off of the Graduated Extended plan. Statistically, less than 5% of all student loan borrowers are enrolled in it.
And then when you see who repays their student loan at the end, it’s like 0.01% of everybody ever finishes on Graduated. Because this happens. Like literally six, eight, ten-year mark… everyone leaves that plan. Like, all the time. And I see it, and yeah. I don’t like it. But it does seduce people at the front end here because of the low payment.
So Nica, I’m a millennial, and I hate phone calls. Literally, I will never call. I will send you a letter before I call you. With that being said, Nica, the options are very simple: Standard, IBR, RAP. You can go to our calculator.
You can go to StudentAid.gov’s repayment estimator. Just go understand your options. And then you just apply online at StudentAid.gov. You go to about this point in time, click apply for Income-Driven Repayment, and you’re there. I understand that my style is not everyone’s. You can of course call your loan servicer.
But I also know from watching this for years, they only know how to answer you based on what you tell them. And so I see a lot of bad information in, leads to bad information out. And so I really encourage you to just go run the numbers yourself, make sure that you’re pulling your Adjusted Gross Income from your tax return yourself, so that you’re getting the right outputs.
But if you’re going for PSLF, every single loan has its own count. Both IBR and RAP count for PSLF. Choose whichever one gives you the lowest payment. I think it’s really important to realize when you’re going for Public Service Loan Forgiveness, your only thing you focus on is lowest monthly payment. It doesn’t do anything. You gotta be on IBR or RAP, but whichever of those two gives you the lowest monthly payment, that’s it.
Well, I’m gonna venture they’re going to take about two weeks to process it. And so they’re gonna process it at the end of July, early August. Your first payment will be due at the end of August, early September.
I went with that option, what happens when it expires? So both the PAYE plan (PAYE) and the Income-Contingent Repayment (ICR) expire in a year and a half, on June 30th, 2028. You’re actually going to have to make a new choice probably at the end of 2027 or early 2028.
With that being said, what happens? You’re going to get letters just like everyone’s getting letters right now to get out of the SAVE forbearance, and they’re going to say, “Choose a new repayment plan.” And you will just need to choose IBR or RAP at that point in time.
Yeah Ashley, so if you do not pay the minimum due, you are still technically going to be in delinquency, and then if you don’t catch up on all your gaps of what you were supposed to pay, by the time you get to the nine-month mark, you’re in default, and all the collection stuff happens.
So Ashley, don’t do that. It’s like even dumber than like just not paying at all because at least if you’re not making payments, you’re saving all that money. But you literally end up in the worst, in the same financial boat, but you’ve paid on your loans. It’s don’t, don’t do that.
No. No. Never. Number one, Berry Nice to Meet You, is I doubt you’re going to get that much of a difference in your HELOC, especially in today’s HELOCs that are like 7%, 8%. You’re probably not going to beat your federal student loans. Number two is, why do you want to risk your house now, instead of you have this unsecured debt?
Yeah, they could garnish your wages potentially, but they can’t take your house. So like, I would not mix the two together. Also if repayment is your goal, get on a standard plan with your student loans. A lot of HELOCs, they have this draw period, you’re accruing interest before you’re even repaying, and sometimes payments aren’t due. Like, you could actually make it more expensive even if you have a tiny bit lower interest rate on a HELOC depending on how you are leveraging it and what repayment looks like on said HELOC.
So the question becomes, what’s your situation? Drop it in the chat.
No, we do not like the Graduated Repayment Plan. Nobody should be in the Graduated Repayment Plan. If you didn’t see me, Cameron… Graduated Repayment Plan seduces you up front, but since it hockey sticks upward, you go on this plan for like six years, and then you’re gonna end up changing, but you’ve lost progress, all the things. Like, just get on a regular plan from the start.
No. So everyone kind of mixes up labels. So let’s talk labels. IDR is the category of plans, Income-Driven Repayment, right? So there’s two categories of student loan plans. The Standard plans (Standard, Extended, Graduated).
The Standard plans repay your student loans in full over the repayment period. That is their job. They take the principal and interest and they make a set number of payments and you repay your loans under the Standard plans. Then you have the Income-Driven Repayment plans. And there’s five of them, right? So you have IBR, ICR, PAYE.
You have the SAVE plan that’s dead, and then you have the RAP plan that starts on July 1st. All of these are considered IDR or Income-Driven Repayment plans. These are different than the Standard plans as they’re not designed to pay off your loans. They are designed to set your monthly payment as a percentage of your income.
And their purpose is to both support loan forgiveness programs and to support those that have a financial hardship and can’t afford the Standard plan payments. Of course, IDR plans will continue to exist because you have IBR. You still have PAYE and ICR for another year and a half. And then the newest IDR plan, RAP, launches in what, three weeks now?
So Ken, a few things. Number one, our show is sponsored by Student Choice, and they are a network of credit unions that do private student loans.
Go check them out. But you’re probably not going to get a private student loan without a cosigner unless you are not an undergraduate student. So if you’re a grad school student, you got a good chance of it.
If you are an undergraduate student, and you’re a junior or senior in a high-demand field (specifically things like nursing or allied health) and you’re almost done, and the program is trustworthy and everything, there are some lenders that might give you a no-cosigner student loan. It’s extremely rare.
Less than 0.01% of undergraduate students can get a no-cosigner student loan. And small banking institutions do not do student loans by themselves. There’s only about 20 lenders in America. Even Student Choice is actually a network of 200 credit unions and they all kind of pool together because the economics of student loans are not great for small institutions by themselves.
Great question, Miracles. So you always fill out the FAFSA, and you take the federal student loan first. So federal student loans first. That’s only in their name. Here’s the problem though, is if you’re a freshman, the limit is 5,500 dollars.
And I think we all know that that’s not going to cut it for a lot of institutions, right? So once the child caps out on their $5,500, everything is going to be on the parent in one way or another. Either the parent can take the federal Parent PLUS loan. That is a loan in their name only. It’s limited to $20,000 a year or $65,000 in total. And it has a 9% interest rate this year. That’s kind of high.
Then the other option that I think that all parents should compare it to is private loans. So you can check out Student Choice, you can check out other options, but if you can get a lower interest rate than that 9% federal loan, you probably should go private because the federal Parent PLUS loan really doesn’t have any benefits anymore either.
There’s no Income-Driven Repayment, there’s no Public Service Loan Forgiveness, all those things. So private loans are potentially a better deal if you can get a lower interest rate. The big thing with all of this, Cardia Queen, is that you as the parent are on the hook for this one way or the other.
And that means you need to make sure that you can afford it in your finances and not over-borrow. Because I’m also guessing you’re in your 40s, 50s, or 60s, and you want to retire, and now you got all this debt. So my biggest thing would be, choose a cheaper college. My second biggest thing is make sure you understand what that repayment looks like and you can afford it.
So Ashley, this is… what’s the payment? Drop it in the chat. Let’s talk about it. So what’s your RAP payment? And what’s your IBR payment? If you don’t know, go run the calculators. Go see the numbers. I mean, RAP caps at 10%. It could be lower, it could be 5%, it could be 10 dollars a month, like what are we talking Ashley? I think that will give a lot of context to the bigger question.
Flower, if you’re in the SAVE plan, you’ve got about three weeks left before you need to start thinking about your student loans. It’s only stressful though because of the uncertainty, and this is what my encouragement for you is… and this is how I feel, I get anxiety about uncertainty.
But once I at least know my options, at least I can plan and take action. So Flower, I would go hit the calculators. Go understand what your Standard plan payment would be. Your RAP plan payment would be. And your IBR payment would be. And that way, at least you know what you’re gonna pay.
And now you have up to three months potentially to make plans to put that into your budget. I think that helps a lot with the anxiety. I wouldn’t keep ignoring ’em because then the pressure becomes intense when you now are backed up against a wall, right? So at least make the plan and try to work the plan over the next couple months.
Again, it’s IBR, RAP, calculators right here. Go run it, check ’em out, link in bio.
The pros is it just repays your student loan completely normally. Like it’s the simplest thing that there is. Like if you want to talk about how loans normally work, the Standard plan is how loans normally work. Fully amortized, even payments over 10 years, you’re done. The con is that may be the highest monthly payment for you and you may not be able to afford said standard plan amount.
So my Standard plan is 202, but RAP is 712. Is there another option?
So Flower, that tells me that one, you make really good money. Like if you have a 712 dollar RAP payment… I know it doesn’t feel like it, like let’s be honest, like no one feels like they make good money.
But in the big scheme of life, you’re doing okay. But number two is, because your Standard is only 202 dollars, it tells me that you also have a very low loan balance. The average student loan payment in America today is pushing 500 dollars. So your payment of 202 is literally less than half of the average.
You’re on the very low side of things. So Flower, my guess is, I would try to budget that 200 bucks and just pay off my loans. I don’t think you’re going to qualify for any forgiveness programs because your loan balance is that, and your income is decent. So yep.
I think this is a great question, because it’s really important to understand how it works. So I always recommend that the child takes their Federal Student Loan first. So federal child loan first. That’s only in their name. Here’s the problem though, is if you’re a freshman, the limit is 5,500 dollars. And I think we all know that that’s not going to cut it for a lot of institutions.
So once the child caps out on their $5,500, everything is going to be on the parent in one way or another. Either the parent can take the federal Parent PLUS loan. That is a loan in their name only. It’s limited to $20,000 a year or $65,000 in total. And it has a 9% interest rate this year. That’s kind of high.
Then the other option that I think that all parents should compare it to is private loans. So you can check out Student Choice, you can check out other options, but if you can get a lower interest rate than that 9% federal loan, you probably should go private because the federal Parent PLUS loan really doesn’t have any benefits anymore either.
There’s no Income-Driven Repayment, there’s no Public Service Loan Forgiveness, all those things. So private loans are potentially a better deal if you can get a lower interest rate. The big thing with all of this, Cardia Queen, is that you as the parent are on the hook for this one way or the other. And that means you need to make sure that you can afford it and not over-borrow.
Because I’m also guessing you’re in your 40s, 50s, or 60s, and you want to retire, and now you got all this debt. So my biggest thing would be, choose a cheaper college. My second biggest thing is make sure you understand what that repayment looks like and you can afford it.
If your application for a new plan is still processing, do your payments still count for PSLF?
C, you get a 60-day processing forbearance, and then no, they don’t count after that. You have to buy ’em back. I don’t know when you applied C, but if you haven’t applied in the last six months, those old processing forbearances from the prior year are basically being tossed out. And so it’s not what you’re saying. I get it that you’re placing the forbearance, but you might be surprised here that in the next 7 to 14 days, that just is processing. So.
Poodle, it’s really a math equation. And the math equation is, run our tax bomb calculator. See what your current minimum is expected to be plus the tax bomb, and you add that up as one scenario.
And then you take your second scenario of what does the higher monthly payment look like to pay off. And then you just compare. Which one is going to cost me the least over the next 10 years, right? Because your job is literally to pay the least amount you have to. And you got a couple scenarios. So run those numbers and decide which one it is. Just math. Yep, check it out.
Francis, you can enjoy the SAVE forbearance until it ends in, you know, end of 2027/early 2028. You’re going to have to pick IBR or RAP at that point in time. But you get to enjoy it for another year and a half. Nothing wrong with that.
As for payments on SAVE counting for PSLF, if you made payments in the six months before SAVE was blocked by the courts (maybe it was 8 months… 8 months before SAVE was blocked by the courts), those directly count for PSLF assuming you certified your employment. If you were making any kind of payments during the forbearance period, I hate to tell you, that money is basically wasted.
They don’t count. You can buy back that time later, but because you actually had no payment due in the SAVE forbearance, you didn’t have a payment to make. So I’m hoping you mean like in the 8 months before SAVE was shut down officially.
Neo’s Mama, one, congrats, that’s really close, I love that for you. Number two is, you should always focus on your own retirement, put that oxygen mask on yourself first. I would make sure that you’re not leaving any free money on the table. Do you have a 401k match, do you have a 403b match?
If so, definitely get the free money from your employer. If you are doing an HSA, that’s the best investment account. But you know, if you’re on a quick path to pay off 2027, you can absolutely do both. I would not abandon savings entirely though to pay off low-interest rate student loans.
Francis, it’s a great question. So if you want more on the financial planning side of things, check out the team at the Student Loan Planner.
They are financial planners, CFPs. This is what they do is intersection of student loans and the financial planning. You don’t need to have anyone manage anything, like no, you just need the plan. You go to college, you got this. You just need someone to help you navigate the options. You can execute on it.
Nicole, I can’t say you messed up. I would just ask why you did it. If you had a Parent PLUS loan, that makes sense. If you were in default, that makes sense.
If you were in neither of them, you might have hurt yourself a little bit. If you had some PSLF qualifying payments, or anything like that… it’s kind of important to understand why and what’s the story there.
So, moving forward Thoughtful Essay, new borrowers have the Standard plan, always available. And then the Repayment Assistance Plan will be your income-driven repayment plan option. The only choice you will not have is IBR. That one goes away for you. You got RAP and you got Standard.
No, because they literally just are creating a new one that starts on July 1st. So IDR plans aren’t going anywhere.
Audrey, if you are in school at least half-time, you can request to go back into in-school deferment.
You have to be at least half-time. And if they have not picked up your half-time enrollment, which what your lender uses is called the National Student Clearinghouse. And it’s like a data set, and your school reports your enrollment status and then your lender sees that. So for whatever reason they’re not seeing your enrollment status.
So call your lender and request in-school deferment because you’re more than half-time. And if they can’t get that status updated, you’ll have a manual form you fill out, that’s like a deferment form, you write your name, and I think you have to have your school sign off on it. So just be ready for that.
Brian, the downside is when you use the alternative method like pay stubs, they always use your gross (very top line). They don’t use your AGI or your net income. And so if you do things like contribute to your 401k or 403b, you don’t get credit for it by using your pay stubs.
You need to use your tax returns to take advantage of that and lower your Adjusted Gross Income. And so generally, using the alternative method with pay stubs gives you a higher payment, all things created equal, than your tax return. The only reason you want to use your pay stubs is if your income on the gross level is lower than what your AGI was on your most recent tax return.
That’s the only time you want to use your pay stubs, because otherwise you’re giving yourself an artificially higher payment than you would normally have using your tax returns. But if your income has gone down, right, that’s even though it’s higher than it should be, it’s a win versus what it was. And if you’re unemployed, you could have a zero dollar payment, so it’s a definite win. But you’re telling me you have a pay stub, so that’s not you. So that’s the downside. Only use it if your income is lower. That’s that’s the rule.
So it says I’m past due. I haven’t tracked with PSLF or any other payment plans. That’s a tough spot to be in, Nicole. So if you are in default, you need to get out of default. Paying less than the amount due is going to keep you in delinquency and default, and you’re effectively just wasting money.
So you either need to consolidate and get back on a repayment plan, and make the full payments, or you need to rehabilitate your loans, do the nine months, and then get back on a repayment plan and make the full payments.
Well Mary, you don’t have to. But it’s strongly recommended you do. Number one, FAFSA is the application for federal student aid. I don’t know if you’re taking them or not. Number two is you would be shocked at the number of people that get federal grants and scholarships and university aid, even if they’re millionaires.
I see it every single year. These families roll in, and especially in year two or three because there’s this massive fall-off. There’s this big push to get all these freshmen to apply, and then these kids don’t apply in sophomore, junior, and senior year, and all of a sudden these aid dollars become available, and if you haven’t put in an application, you’re not getting any money.
And you might be making 200k a year, but nobody else is claiming it, and so just by you putting in your application, all of a sudden you got 5,000 bucks. Like I don’t know, to me, the 20 minutes that you just click those buttons and do it is like the easiest thing ever. And you’d be shocked how many people get financial aid, especially in subsequent years, just by doing the FAFSA.
Francis, you get to enjoy it for another year and a half. Nothing wrong with that.
Hey Lin, if you’re not going for PSLF, and you literally the difference is 30 dollars a month, just go standard. Just be done with it. That means you pay it off in 10 years. Just like standard’s the best there.
So depending on the repayment plan, and assuming that you’ve actually been paying under said repayment plan, potentially. So IBR is 20 years for borrowers after 2014. IBR is 25 years for borrowers before 2014.
ICR is 25 years. And the new Repayment Assistance Plan is 30 years. This also assumes that you’re actually paying under these repayment plans. Times of forbearance don’t count. So if you’re in the SAVE forbearance, for example, that doesn’t count towards that timeline. The COVID time did, so something to think about.
Yeah, Haley, you gotta get out of default. You’re costing yourself so much money. They’re taking that tax return from you, and it’s not even going to your student loans, it’s going to collection costs and fees, and your student loan balance is probably still growing. So Haley, you gotta consolidate or rehabilitate.
Consolidation is instant, it’s 30 to 60 days, you’ll get back on track, you enroll in a repayment plan and you start making progress again. Rehabilitation is better, but it does feel insurmountable. I get it, but rehabilitation takes nine months, and then they remove the default from your credit.
The key is, Haley, go run our calculators, see what your RAP payment will be on the repayment estimator, and understand what your future payment will look like. Because they’re going to start regular collection activity here soon too. So you haven’t gotten your tax return, but starting this fall (October), they’re going to start wage garnishment.
Wage garnishment is 15% of your discretionary income of your paycheck. That’s more expensive than you’d pay under a repayment plan. So when you’re saying it feels insurmountable, I get it. Just go consolidate or rehabilitate. But that will be cheaper. Why this fall? Because they’ve not done collection activities on wage garnishment since 2020.
And they have moved everything over to the Department of the Treasury, and they’re ramping it back up for this fall to have wage garnishment resume. So, and they still take your tax return too. Like you just start throwing this money away.
So when you say it feels insurmountable, I get it, but you’re wasting more money being in default than you will just being in a repayment plan. It’s crazy to think about, but like at least you’ll get your tax returns back. And, well not back, but they won’t take it going forward. You’ll take less of your paycheck when they start wage garnishing.
You’re paying less, like it’s better, and you can start getting back on the financial track. All right guys. Haley, I’m glad that was the kickstart you needed. Thanks for being here, guys.
Linnea, if they have consolidated and they’re on an income-driven repayment plan, yes, their payments can go down because of the income-driven repayment plan. If they have not consolidated, then the answer is no, because they have to be consolidated before June 30th. And I don’t think you’re going to have time to do that.
Tonia, that is exactly what Student Choice is there for. So go click the link in bio and get a quote. Once you borrow the student’s federal student loans, you should compare private student loans and see if you can beat that 9% Parent PLUS loan rate.
If you get a lower interest rate on a private student loan, take the private loan. Because there’s no income-driven repayment, there’s no PSLF for Parent PLUS loans anyways, unless you somehow get out of standard, which Parent PLUS loans don’t have.
KP, so you can file a Borrower Defense application. There’s a student loan forgiveness program called Borrower Defense to Repayment. But because the school was closed down does not necessarily mean that you individually were defrauded by said school. So there’s no necessarily blanket forgiveness here.
You would have to fill out the Borrower Defense application. There’s a great organization called the Project on Predatory Student Lending. They have some great guides on how to fill it out. You did fill that out. With that being said, as you know, um, the odds of you actually getting your loans forgiven are slim to none. So, my fingers are crossed for you. They are.
D, your interest rate was based on the student loan interest rate the day you borrowed that loan back in whenever it was. Changing repayment plans doesn’t change your underlying interest rate at all on your student loans.
And remember, for Income-Driven Repayment plans, your interest rate doesn’t even play a factor in your payment. Your payments are based on your income. Your interest rate only plays a factor on Standard repayment plans where you’re trying to fully pay off your loans.
So again, IDR is the big overarching picture, Samar, where you are under IBR, ICR, PAYE. I think I covered a lot of that already. So if you’ve been doing that for 20 years or 25 years, the RAP plan is 30 years.
Only if they’re on the Income-Contingent Repayment plan after 25 years. Or Public Service Loan Forgiveness (PSLF). But remember for PSLF for Parent PLUS loans, the employment is based on the parent’s employment, not the student’s employment.
Yeah, Aunt Bra, because Parent PLUS loans are your loans. Your son has no legal obligation to pay them. The employment for PSLF has to be your employment. It’s not your kid’s loan. You are borrowing the money for your kid. So unless you work in public service, you can’t get PSLF on Parent PLUS loans.
Erica, you have a six-month grace period. At the end of your six months, you have to pick a repayment plan. Run the calculators and decide what your goal is. Are you going for PSLF? Are you trying to pay it off? Pick standard or an IDR plan like RAP or IBR based on what gives you the best payment for your goals.
You’ll go into default. Once you hit nine months of missing payments, they put you in default. Your credit score tanks. They add collection costs. They will take your tax refund, and eventually they will garnish your wages at 15%. Don’t ignore them.
Yes, it does. All outstanding interest becomes principal. But the interest rate on a consolidation loan is just a weighted average of all the loans you consolidated, rounded up to the nearest 1/8th of a percent. It doesn’t actually raise your interest rate, but the capitalization does happen.
For undergraduate, an education line of credit (like Student Choice offers) is better because you only apply once. With a traditional private student loan, you have to reapply every single year (freshman, sophomore, junior, senior). With a line of credit, you apply once, get approved for a limit, and just draw down what you need each semester. It’s much easier for families.
Yes. If you file your taxes as Married Filing Jointly, all IDR plans (IBR, RAP, PAYE) will use your joint income. If you want them to only use your income, you have to file your taxes as Married Filing Separately. But you need to do the math to make sure the tax penalty for filing separately isn’t more than what you save on your student loan payment.
Consolidate and get on ICR (Income-Contingent Repayment). It takes 25 years. Or work in a qualifying public service job for 10 years (PSLF).
No. Never. Always take the federal student loans first. The student’s federal loans are always the best deal, even if the interest rate seems a little higher, because they have federal protections like death and disability discharge, forbearance options, and they don’t require a cosigner. After you hit the federal limit, then you compare Parent PLUS vs. Private loans.
Yes, the Department of Education is cracking down on bad programs, especially for-profit colleges and programs where graduates don’t make enough money to pay back their debt. This is part of the “Gainful Employment” rule. It’s designed to stop colleges from charging a fortune for degrees that lead to minimum-wage jobs.
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