Over 7 million student loan borrowers enrolled in the SAVE plan are urged to evaluate their payment options for federal student loans following a recent agreement that would dismantle President Biden’s student loan repayment plan. This shift comes after the Trump administration’s action in December, which is currently pending court approval, mandating that all SAVE borrowers will soon have a limited window to transition to a new repayment structure while all pending applications will be denied.
Robert Persichitte, a certified financial planner at Delagify Financial in Arvada, emphasizes the importance of being proactive during this transition. He advises borrowers to thoroughly understand how changes in their payment plans will affect them, particularly with regard to interest rates. “Many borrowers on the SAVE plan could benefit from an income-adjusted interest rate. Choosing a plan can have long-lasting implications, so it’s crucial to take control of your financial decision-making as you plan for repayment,” Persichitte noted.
He recommends that borrowers log into their federal student aid accounts to assess their individual circumstances related to the payment changes. If modifications in payment amounts are anticipated, borrowers should set up a budget. Returning to fundamental financial planning principles can help identify necessary expenses and areas where cuts might be made.
“Prioritize paying your immediate bills to ensure you maintain housing stability. Once that is secured, shift your focus to long-term strategies for managing payments effectively to prevent excessive interest accumulation,” he suggested.
Additionally, Persichitte highlights the importance of setting clear financial goals. He has observed that individuals often find it easier to manage debt by addressing one financial obligation at a time. “Juggling student loans while saving for a home can be challenging. Therefore, it is vital to balance your financial priorities. For many, focusing on resolving one issue at a time proves to be more achievable,” he remarked.
The Department of Education urges SAVE borrowers to utilize the federal student aid loan simulator tool to explore alternative repayment plans. New income-driven repayment plans will be accessible to new borrowers starting in July, offering expanded options for financial relief. This timely advice and information could empower borrowers to make informed decisions and establish a sound financial future.