Student Loan Payments Due. Now What?

The student loan payment pause has officially ended, and borrowers are expected to make their agreed-upon payments, but what does that mean for you? What options do you have, if any?

The good news is that you aren’t necessarily locked into the standard or default repayment plan you originally signed up for. In other words, when you first got your loan(s) there was a set monthly payment you were responsible for over a certain period of time. If you can comfortably manage those monthly payments without financial strain, great! Then get going and boost that credit score!  

On the other hand, if you’re unsure if you can handle those payments, you may want to explore some of the available avenues to lessen the burden, such as income-driven repayment plans provided by the government. 

Income-Driven Repayment Plans available:  

• Pay As You Earn (PAYE) Plan: With this plan, monthly payments are capped at 10% of your discretionary income, and your loan could be forgiven after about 20 years of payments. 
• Income-based Repayment (IBR) Plan: Monthly payments are capped at a percentage of your income, usually around 15%, and depending on how much you borrowed, loan forgiveness may be available after 20 – 25 of payments.  
• Saving on a Valuable Education (SAVE) Plan:¹ SAVE is the newest repayment plan. This plan calculates your monthly payment based on your income and family size. It then increases the income exemption from 150% to 225% of the poverty line, eliminates 100% of interest for both subsidized and unsubsidized loans after a scheduled payment is made under the plan, and excludes spousal income for borrowers who are married and file separately.

To enroll in any of these Income-Driven Repayment Plans, you’ll need to apply, though.  

Other Options Through Arkansas Federal 

If you’re still worried about making ends meet, consider speaking with one of the experts at Arkansas Federal Credit Union. Many times, it just takes talking to someone to look at your full financial picture to find out where you can cut corners or save money. There’s no obligation and no cost to simply talk to us. We’ll look for ways to lower your payments and/or interest on other loans and credit cards to give you more wiggle room in your monthly budget, making paying your student loan obligations a bit more feasible.  

What happens if you don’t repay your loan? 

If you miss a payment, your loan becomes delinquent.  

• When you are delinquent, your loan servicer will report it to the three major national credit bureaus. 
• It will affect your credit score, making it harder to get credit.  
• After so many days, your delinquent loan goes into default. 

 What happens if you default on a loan?  

• You can lose your access to more student aid/loans.
• The default status will damage your credit score. 
• To pay off your loan, the government can:
  • Take your tax refund 
  • Take up to 15% of your paycheck 
  • Take part of your Social Security benefits 

So, it’s important to resume making your student loan payments. 

In a Nutshell 

Remember, you are not alone on this journey. Many others are going through similar experiences, and support and networks are available to help you make informed decisions, and Arkansas Federal can help point you in the right direction to get started.  
 
Many times, it just takes talking to someone to look at your full financial picture to find out where you can cut corners or save money. You might also find it helpful to review Budgeting Made Simple and download a monthly budget worksheet to help manage your budget with student loan payments and other expenses. 

Apply for an Income-Driven Repayment Plan, contact your local branch or give us a call at 800.456.3000 today.