What Should Student Loan Borrowers Consider When Looking at New Repayment Options? | Global News Avenue

Student loan borrowers who have been in hold mode now have new repayment plan options.

ongoing litigation Millions of borrowers have joined Save for a valuable education (SAVE) plan endure And put the student loan forgiveness program in trouble. Therefore, borrowers may wish to Switch to a recently reopened repayment plan For more stability or a path to forgiveness.

Investopedia spoke with Alyssa Schaefer, general manager and chief experience officer at Laurel Road, a digital banking platform specializing in student loan counseling and budgeting. Schaefer discusses what borrowers should keep in mind when considering changing their repayment plans. The interview has been edited for brevity and clarity.

INVESTOPEDIA: Why would a borrower in the SAVE repayment plan want to switch to another plan?

Alyssa Schaeffer: One of the main reasons you don’t want to stay in SAVE and remain in forbearance is that the time you are in forbearance does not actually count toward your forgiveness period under the SAVE program.

For example, if you are in Public Service Forgiveness Loan (PSLF) Plan, your forgiveness period can be 10 years. If you are in Income Driven Repayment (IDR) plan, it could take 20 to 25 years, depending on the plan.

INVESTOPEDIA: Should borrowers consider their financial situation before deciding on a repayment plan?

Shafer: Generally speaking, if you sit down and consider which payment plan might be right for you, you need to consider the first point: your income growth potential. So this is often overlooked and it’s hard to know ahead of time, but you might want to really think about what the most likely scenarios are.

So, for example, if you’re a hospitalist and don’t make a lot of money, but you have the potential to make more, you need to consider how that will affect your student loans.

Second, you need to consider your loan balance, how much you need to pay off, and how quickly you can pay it off. So, for example, if you were to pay off your loan, you might be able to pay it off in 10 years. You need to consider the fact that the ICR plan may not make sense for you because its forgiveness period is much longer.

You may want to think about some of your life decisions, not that you will change your mind about any of them, but how they will affect your student loan payments.

For example, if you’re getting married to a high-income earner and you file taxes jointly, this could affect your student loan payments because that income will be combined with yours. Then, if you are enrolled in the ICR plan, it will add that 20% to your total income.

Finally, I would say that because of all of these nuances, we always recommend that people work with an expert—an expert who understands these programs deeply and has worked with hundreds of borrowers to advise them on the best program. Every situation is very different.

Our biggest advice is that borrowers should really make rational decisions and not rush into anything. Take your time. Take a closer look at your financial situation. Take a close look at your options. Talk to an expert.