The resumption of student loan repayments after a three-year hiatus kicked in Oct. 1. This follows the Supreme Court striking down President Biden’s student loan forgiveness program — in a 6-3 June 30 decision — and will put a dent on many borrowers’ budgets.
Indeed, the average monthly student loan payment is $503, according to the Education Data Initiative.
What’s more, a Credit Karma survey found that a staggering 37% of federal student loan borrowers said they have not saved money in anticipation of resuming their payments.
Paying back the loans is not the only hurdle borrowers are facing though. Bridget Haile, chief customer officer at Summer who has student debt, offers advice on how to handle the challenges of this financial burden.
Stay on Top of Your Loan Servicer
Haile’s primary piece of advice is to constantly monitor your loan servicer.
“My loan situation is pretty simple: I’m on the standard plan in autopay, and I target extra payments to my loans with the highest interest rates,” she said. “But along with about half of student loan borrowers, I got a new loan servicer during the payment pause, and a theoretically simple situation has become anything but.”
Haile said it’s important to enroll in autopay because it comes with an interest rate discount, but setting it up correctly has been much more challenging than she expected.
“My new servicer has continually made mistakes on my account, and it’s taken me several weeks of ongoing communication to get it set up correctly,” she explained. “As soon as they got that one thing right, they then marked a loan that I had paid off months ago as being no longer paid off. I wish the transition process to repayment were smoother, but unfortunately borrowers are going to have to be really proactive about keeping their loan servicer honest and on track.”
Keep Records of Conversations With Loan Servicers
As Haile explained, phone wait times have been quoted as hours and borrowers are having a very difficult time getting a call back from their loan servicers.
“I’ve had more success reaching someone quickly via chat on the website,” she said.
She added, however, that there’s a big caveat: Make sure to keep records.
“My servicer told me that they don’t save records of their chat history, which I only know because I asked,” she said. “And after several mistakes on their end, I wanted to make sure there was a record of our conversations. I started copying and pasting all of our conversations into a document that I could save, and I also started following up via email after chats to reiterate what we discussed.”
Submit a Complaint When Something Doesn’t Look Right
When Haile’s loan was showing as not paid off even though she knew it was, she downloaded records from Federal Student Aid and her credit report to make sure she could back up her case.
“Then I asked my servicer to escalate my requests and also submitted a formal complaint through Federal Student Aid,” she said, adding that they will work on the issue and keep you updated with progress. “They haven’t resolved the issue yet, but I’m hopeful that with my continued persistence it’ll get worked out.”
Ask Your Employer for Help
Haile said she feels lucky as her employer also contributes directly to her student loan as part of an employee benefit.
She also recommended that if you don’t have this type of benefit already, ask your HR team about implementing it — not only can the company contribute directly to your student loans, it also can give you access to expert help as navigate the process.
“I wish so much of the burden of this transition wasn’t on borrowers themselves and that the processes in place were actually working as intended,” Haile said, “But I think the best thing borrowers can do right now is to make sure they’re asking for the accountability and help that they deserve.”
Use the Extended Repayment Plan and the SAVE plan
Joseph Reinke, CFA and founder of FitBUX, said he used a “trick” that is available if you owe more than $30,000: the extended repayment plan.
This plan allows you, under certain conditions, to extend your loan to 25 years, which in turn drops your required payment.
“For example, my payment dropped from $500 a month down to about $275 a month,” Reinke said. “Then I took the $225 of freed-up money and used it to target the high-interest rate loans first. You can also target the low balance loan if you’d like. With the company I founded, we call this the extend and prepay method.”
In addition, Reinke said the new Saving on a Valuable Education (SAVE) program puts this on “hyperdrive” and drops your interest rates at the same time.
“You can drop your payments based on your income,” he said. “In my example, my payments would’ve been about $100 a month. The interest on my loans was about $225 a month.”
Indeed, the new SAVE Plan is an income-driven repayment (IDR) plan, which protects more of your income before charging you 10% of your remaining discretionary income and could result in a payment as low as $0 a month.
As such, it provides the lowest monthly payments of any IDR plan available to nearly all student borrowers and replaces the REPAYE plan.
It went into effect in July and cuts monthly payments to $0 for millions of borrowers making $32,800 or less ($67,500 for a family of four) and saves all other borrowers at least $1,000 per year, according to the Education Department.