By Katie Krumpter, NYLAG Coordinating Senior Financial Counselor
After three and a half years of a payment pause, the Federal Student Loan system will be fully back to normal after the one year “ramp up” and Fresh Start enrollment periods end on September 30, 2024. We thought we would take this opportunity to share how to access your student loan data, select your student loan payment, and approach student loan forgiveness.
- Accessing your student loan data.
The first thing you need to do is to be able to access your loans, which means creating an FSA Login: studentaid.gov/fsa-id/create-account/. If it has been several years since you last logged in, you may need to either reset or create a new ID.
Once logged into your student aid account, you can find who your servicer is. Your servicer is where you will make payments and they are the ones who you should address any questions about your loan to. If you haven’t already created an account with your servicer, you should do that as soon as possible.
- Pro tip: If you need to create a new ID, it will take the Social Security Administration (SSA) three business days to validate your identity. Until SSA verifies your identity, the only thing you can access is your FAFSA application. You will not be able to access specific information about your loans until after Social Security confirms your identity.
2. Selecting your student loan payment.
There are two main types of payment plans with federal student loans: Standard and Income Driven Repayment (IDR) plans. A standard payment plan does not require much explanation – the loan is amortized, and you pay interest and principal each month until the loan is fully paid off (10-30 years based on your loan balance).
An IDR plan is based on your income. A part of your income is excluded, and then the payment is calculated based on your (remaining) “discretionary” income. There are two main IDR plans – SAVE and Income Contingent Repayment (ICR). The SAVE plan is the new “Biden” plan that you have probably heard about.
- Pro tip: To forecast how much you would pay on each plan, you can use the Department of Education’s student loan simulator: studentaid.gov/loan-simulator/. Note you would get better results when you log in into your Student Aid account. Otherwise, you would have to enter each loan amount and interest manually.
3. Pursuing student loan forgiveness.
There are three main ways to have your loans forgiven before paying them off:
A. Public Service Loan Forgiveness (PSLF) This type of loan forgiveness is specifically for “Public Service” employees. If you work full time for any U.S. based government (federal, state, local or tribal) or 501c (3) for ten years, while making payments based on your income (IDR plan), your loan balance at the end of those ten years will be forgiven tax free.
B. Income-Driven Repayment discharge: As mentioned above, an IDR payment is based on your income, not your loan balance and interest rate. If your income is low enough and/or your loan balance(s) is high enough, it is possible that you would never pay off your loans while on an IDR plan. When these programs were created decades ago, that was never the intention. Undergraduate loans will be forgiven after 20 years of payments and graduate school loans will be forgiven after 25 years of payments. For people on the SAVE IDR*, there is a “small loan” exception which could result in forgiveness in as few as ten years, if the amount disbursed was $12,000 or less.
*Please note that as of July 2024, parts of the SAVE IDR are currently in litigation, so the small loan forgiveness is on hold for now.
C. Disability Discharge: The final way to get your loan forgiven is through a disability discharge. This is only appropriate if you have completed school and do not expect to need the federal student loan system in the future. Many of these discharges are done automatically for people on SSI and/or SSDI.
Tip: You can learn more about the loan forgiveness programs available at: Student Aid Student– Loan Forgiveness
There have been many adjustments to the Federal Student Loan system over the past several years to make the programs work better for borrowers. On our next blog post, we plan on publishing examples of cases we have encountered that show how we have been able to support our clients manage their student loan debt.
Still have questions?
NYLAG Financial Counselors help you create a plan to secure a financially stable future.
- If you are currently working with a NYLAG financial counselor, reach out to them now to discuss your student loan options.
