AUSTIN, Texas — For the past three and a half years, there has been a pause on student loan repayment. But starting next month, interest will begin adding up. In October, payments are set to resume.
The U.S. Supreme Court overruled President Joe Biden's first attempt to wipe out some people's student loan debt. But in a new move this week, the U.S. Department of Education sent out emails to hundreds of thousands of federal student loan borrowers, telling them their student loans have been forgiven.
Those emails only went to those on income-based repayment plans who have been paying what they can for at least 20 years – but 800,000 people are expected to get the email.
For everyone else, President Biden said he's not giving up. He launched the "SAVE Repayment Plan" this week. It decreases monthly payments by increasing the income exemption. So, the less you make, the less you'll pay.
It's based on discretionary income – your adjusted gross income, minus a new, higher guideline. For example, the average household in the Austin area brought in about $76,000 in 2019, the last time the State of Texas released data. If that’s a family of four, the higher guideline is about $67,000. So, if that family had $9,000 in deductions, it would bring their adjusted income in at less than the new guideline, making their monthly payments zero.
The plan would also eliminate all remaining interest if you follow the rules of the program. The administration claims no matter how much you make, you'll save at least half on your monthly payments. Some loans are already eligible, but some must be consolidated first. And even if your loans are in default, you may still qualify under the "Fresh Start Initiative."
If you apply now, the website claims your new amount will be shown on your first bill in October.
But don't start spending that extra cash yet: opponents of this new plan say they expect a lawsuit against it as well.