Student Loan News for Dec 2024

Student Loan News for Dec 2024

Student Loan News: What You Need to Know

As the year winds down and the holiday season unfolds, many of us are reflecting on what’s to come—especially in the wake of the recent Presidential election. While the future of student loan policy is still uncertain, one thing is clear: this is a crucial time for borrowers to stay informed and proactive. With so many moving pieces, from court rulings to updates from the Department of Education (DOE), having a strong strategy in place can bring peace of mind as you enter the new year.

The PAYE Plan is Back!

Over the past couple of weeks, an unexpected development has reshaped the student loan landscape. Due to court rulings temporarily blocking all Income-Contingent Repayment (ICR)-based plans, the DOE found itself out of compliance with the Higher Education Act. In response, they reinstated two previously phased-out plans: Pay As You Earn (PAYE) and the original ICR plan—both of which were slated for elimination under SAVE.

What makes this particularly interesting is the DOE’s silence on the matter. While media outlets have highlighted this as a major headline, the DOE is downplaying it, likely because the reinstatement was a legal necessity, not a policy choice.

Many voices—both in the media and from other loan advisory firms—are urging borrowers to switch to PAYE or Income-Based Repayment (IBR) plans. However, we’re recommending most of our clients to stay the course for now.

Here’s Why:

• Special SAVE Forbearance: Borrowers who apply for SAVE are being placed on a special forbearance program with no payments required until April 2025. While this forbearance doesn’t count toward PSLF, it does provide a 100% interest subsidy. This can amount to thousands of dollars saved for those with significant debt. Borrowers pursuing PSLF can still take advantage of the PSLF Buyback Program later.
• PAYE’s Limitations: While PAYE isn’t inherently a bad plan, its payments are slightly higher than SAVE, and it lacks an interest subsidy. Additionally, there’s no clear timeline for processing PAYE applications. Some servicers are reportedly holding off on processing IDR applications until after January 1st, adding further uncertainty. 

Addressing Concerns About PSLF Buyback:

Some advisors suggest abandoning SAVE for an older IDR plan due to uncertainty about the PSLF Buyback Program. However, we’ve seen no criticism of this program from either Republicans or President-elect Trump, and there’s no indication it will be discontinued. So while nothing is guaranteed, we don’t believe fear of policy changes justifies giving up several months of no payments and interest-free status.

What Should You Do?

Until the DOE finalizes its plans for IDR options, we believe the special SAVE forbearance is a strong position for most borrowers. That said, every borrower’s situation is unique, and making the best decision depends on your specific goals and financial circumstances. But if you need help navigating this uncertainty, click here to schedule a consultation with one of our expert advisors.

The SAVE Lawsuit: No Updates Yet

As for the ongoing SAVE lawsuit, nothing has changed from last month. The 8th Circuit has yet to issue an opinion following its October 24th hearings. We’re beginning to wonder if they will simply sit on it and let the new administration deal with it after January 20th.

Give Yourself the Gift of Clarity

This holiday season, set yourself up for success in the new year by gaining clarity about your student loans. With so much uncertainty, there’s no better time to take control of your financial future. Whether it’s creating a repayment plan or exploring forgiveness options, our expert advisors are here to help you start 2025 with confidence and peace of mind. Take the first step today and let us help you unwrap the possibilities!