Financial advisor offers tips as federal student loan repayment resumes

Published: Oct. 2, 2023 at 6:04 PM EDT
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BINGHAMTON (WBNG) -- Forty-three point six million borrowers are back on the hook and have to begin repaying student loans starting Oct. 1.

After a three-year pause on student loan payments by the Biden Administration, Americans are set to resume paying their student loans this month. The Supreme Court rejected a White House plan that would offer up to $22,000 in loan forgiveness to millions of borrowers, so now it’s time for people with student loans to resume paying their debt.

“Your student loans need to be repaid, and you have to figure out the best way for you to work within your own budget to pay those loans back,” said Financial Adviser Jonathan Barrett.

The Department of Education estimates that 43.6 million people in the United States owe a total of $1.6 trillion in federal student loan debt, and many people have not made a student loan payment since March 2020. As Americans begin to tackle the money they owe, Barrett offered some tips.

“The best option for student loan repayment is obviously the standard repayment option over ten years, which will provide the least amount of interest for you to accrue over that time and pay it down as quickly as possible,” said Barrett, who serves the Binghamton area. “If you cannot pay the monthly payments back, you must look at the alternative options. The alternative option could be an income-based repayment option, you can work with your provider and your payments can be reduced based on your income to provide an appropriate level of payment for you.”

The Biden Administration revealed the new Saving on a Valuable Education, or SAVE Plan, which can lower the monthly payment for people based on their monthly income and family size. There are also benefits for public service workers whose payments made under SAVE will qualify them for the Public Service Loan Forgiveness program.

“SAVE is the most affordable repayment plan ever and will save millions of borrowers money on their monthly payments,” White House Press Secretary Karine Jean-Pierre said during a Sept. 5 press briefing.

There is a 12-month grace period where a borrower’s credit won’t take a hit if a payment is late, but interest will still be charged. Barrett recommends using the student loan simulator and also meeting with the student loan provider to understand the best way to repay their debt.