Episode Transcript
Brenton: [00:00:00] The recent negotiations that we've seen for the Debt ceiling have confirmed that there is no extension coming. Student Loan payments will restart in the fall of this year. In this episode, we talk about how those Debt ceiling negotiations will affect your loans and how to make sure you're prepared when those payments actually do kick back in.
Let's get started.
Brenton: Hello, my name is Brenton Harrison of Escape Student Loan Debt, and your host for the Escape Student Loan Debt podcast. If you've been keeping up with what's going on in the news, you've probably been seeing a lot of articles about how our country was on the brink of defaulting and all of the potential economic calamities that could have resulted if that would've occurred. Now, over those past several weeks, there have been negotiations between Democrats and Republicans to finally put together a deal, and the [00:01:00] compromises on both sides have led us to the cusp of an agreement that might pull us back from the precipice of default.
But that agreement, as tentative as it is now, has some implications for your federal student loans. If you've been following along with the podcast, you know that there are several major student Loan happenings that not only are up in the air right now, but are being heavily contested by Republicans.
As it stands, there is the Biden Student Loan forgiveness program that is currently before the Supreme Court. The new version of Revised Pay As You Earn is still yet to be confirmed and cemented into law, and there are a number of Republican lawmakers who are opposed to the plan.
So there are some things like that updated payment plan that even though there's consternation amongst the parties, it's unlikely that they'll be repealed. The Biden student Loan forgiveness program is an exception. I have shared that I think that the Supreme Court is likely to strike that down, but the reason that's important is because that date that's been dangling [00:02:00] out there has been June 30th. It actually started as May 30th. But it's now June 30th where the Department of Education had said that the earlier of 60 days following the Supreme Court announcement on the program, or June 30th, would be when student Loan payments restart. Now, in those Debt settle and negotiations, the Republican Party had the ability to kind of negotiate some of that stuff off the table. They could have said, in order for us to agree to a deal, you have to take away the updated version of Revised Pay As You Earn. You have to drop this plan to do the Biden student Loan forgiveness program regardless of the case before the Supreme Court. And they could have said that student Loan payments have to start tomorrow.
Unlikely. But it's something that they could have done. So a lot of people have been wondering what this final legislation will look like, and we now know they have allowed the Biden student Loan forgiveness program to stand pending the Supreme Court decision. They have allowed the updated version of Revised Pay As You Earn to stand in exchange for the Democratic [00:03:00] party agreeing that this will be the final extension for the student Loan payment pause, and that agreement states that student Loan payments will restart no later than August 30th of this year.
Now, that lines up with the timeline we've really been discussing. I have told you that if June 30th was the date you go June to July, July to August, That's around the time that we've been talking about, and we've also shared that it takes about 30 days for that locomotive to get going again. So even though August 30th will likely be the date, September 30th is likely around the time that your first payment would be due.
So in the previous episode, we said September, October-ish, it's looking like September, October-ish is now the thing that we know definitively.
So in this episode, we're gonna share some quick hitting tips that you can be aware of and take action on to make sure that you're okay before student Loan payments restart.
And many of these have to do with the one time revisions that are associated with the Income Driven Repayment Waiver and subsequently the Public [00:04:00] Service Loan Forgiveness Waiver. We covered that the formal P S L F waiver has ended, but the IDR waiver is allowing that one time revision to encompass the credits for public service Loan forgiveness as well. So they're kind of one and the same. And that's something that also could have been negotiated off the table.
They could have done away with the revision of those past credits. So there's some positives here, in spite of the fact that you're gonna have to make the student Loan payment for the first time in like three and a half years.
So after the break will tell you what steps will help you along the way. And if you have access to that student aid data file we've been discussing in previous episodes, pull it up because it will be very helpful as we walk you through what you need to do next.
[00:05:00]
Brenton: Whether or not you have your student aid data file in front of you, the first thing you need to do is figure out who your current student Loan servicer is.
There are a number of student Loan servicers whose contracts were not renewed with the Department of Education in the pandemic, and as a result, Those borrowers had their loans transferred to a servicer that took over that Debt.
If you don't have your aid [00:06:00] data file in front of you, you likely have an email or some type of communication from your old servicer letting you know the details of who your new servicer will be. You might even have emails to a current email address if they have your current information from the new servicer.
If you have your student aid data file, you can actually locate your current loans, and I told you that this file has a record of all of your loans, even ones that might have a zero balance, but if you find your current loans, you'll be able to find a good bit of information, including the servicer. It tells you when this Loan began.
It tells you the current principle, balance and interest. It tells you the student Loan payment plan you were on prior to the pandemic, which we've discussed in the past. We'll discuss again in a bit, but as you get towards the bottom of the section for each of your current loans, you'll see a section that says Loan contact type. And on this file it says Current ed servicer, and then you'll also see Loan contact name, and that is the company that's servicing your loans.
In our scenario, our borrower has a Loan [00:07:00] contact that says Department of Education/Aidvantage. So AidVantage is their student Loan servicer. It shows the contact, address and phone number for that servicer as well as The website for the servicer.
So when you find yours, if you have not found an email in your inbox, you can use this information. And the first thing I want you to do is go to that servicer's website and sign up for a profile. And with that profile, you need to verify that they have the accurate contact information on file. That is your phone number, that is your address, that's your email address.
Because what you don't want to happen is that if they contact you about your loans or attempt to contact you with Out of date information that you might miss a crucial deadline that can not only impact your loans, but could also impact your credit. The next thing you need to do if you have not already is you need to sign back up for autopay if that's how you paid your loans prior to the pandemic. Whether or not your Loan servicer has switched the connection that established your auto payment [00:08:00] before the pandemic has been severed. You have to sign back up again for those payments if you want them to auto-draft. So make sure that it's updated. Make sure you've signed up for auto pay.
The next thing I want you to do, and we've done this in previous episodes, but it's a good refresh, is to find out what your student Loan payment plan was before the pandemic. It's going to be in the same information where you find out about each of your individual loans. In the scenario of the person we have on screen, we can see their Loan Repayment plan Code description is Revised, Pay As You Earn. So prior to the pandemic, this person was paying $513 a month under the Revised Pay As You Earn Plan.
Now, that's important because we've talked in several episodes about how the calculation for these payment plans are changing in some scenarios, and that there is the possibility that you might need to make a switch before student Loan payments restart. So you may have a payment plan that's not based off of income. Uh, you could be on a standard plan, a graduated plan. And in those scenarios, it [00:09:00] might benefit you to switch to an Income Driven Repayment plan when they start. But there may not be the same sense of urgency like we discussed with the updated version of Revised, Pay As, You Earn, where certain borrowers who currently are on another type of plan called Pay As You Earn, have to make a permanent decision to stay or switch plans by July of this year. So if you're on a plan that's not an IDR plan, maybe not that sense of urgency. But if you are on an IDR plan, you also want to know what income they were using to calculate your payment because as you recall, when the payment pause ends, you will start off by making whatever payment you were making prior to the pandemic.
So for this person who was paying $513 a month, I'd be very interested to know what income were they earning when they had this payment calculated. And I can get a better idea of that income by looking at their Loan Repayment Plan anniversary date.
You've seen this sample, a data filed many times over the previous episode, so you might have remembered it, but this person's IDR plan anniversary [00:10:00] is May 27th, 2023. And I'll tell you what information that gives me. It gives me a really good idea of what year's tax return the Department of Education used to calculate their most recent payment, and I'll tell you why. Student Loan payments were frozen in March of 2020. So if the person that we're looking at, in our example, has an IDR plan anniversary of May of each year, then we know that in the year 2020, they never had to update their payment under the Income Driven Repayment plans because it hadn't come yet. Their anniversary had not yet arrived. So if 2020 was the year that they were frozen and this person did not have to update their income in 2020, it's highly likely that the last time they updated their payment was in May of 2019. it's highly likely that at that point in time, even though 2018 might have been their most recently filed tax return, that return may not have been accessible yet in the IRS database.
So, as crazy as it sounds, this person's payments were paused in [00:11:00] 2020 based on a payment that they hadn't changed since May of 2019. That was calculated based off of a taxable income that might have occurred in 2017.
And in comparing what that income was in that year to what it was in your most recently filed tax year, which is probably now 2022, you can start to calculate whether it benefits you to hang on to that previous payment as long as you can, or whether it would benefit you to actually base your payment off of your income now.
And that might seem crazy because you're probably assuming, and it may be true in your case, that your income in 2022 or 2023 is radically higher than what it was in 2017 or 2018, but that's not the only thing that you have to factor in.
You also have to consider things like the new calculations for things like Revised Pay As You Earn, where you can have a potentially lower payment or a lower percentage of your Discretionary Income going towards your loans each year based off of the changes they've made to things like the percentage of your federal poverty level.
Or [00:12:00] cutting your payments from 10% to 5% in certain scenarios for people who might only have undergraduate student loans.
And it's worth taking the 20, 30 minutes to figure out, okay, here's what my taxable income was in 2017 or 2018. If I compare that to what it would be by using my 2022 income and calculating it under the new rules for Revised, Pay As You Earn, where am I saving the most money? Because I have seen scenarios where the difference in payment is hundreds of dollars a month, and you need to know this before student Loan payments restart.
And here's why. If it benefits you to keep your student Loan payment where it is, we shared in the last episode how long you can expect for that payment to remain where it was before the pandemic. And in some scenarios, there are people who may be able to keep that payment until early 2025, based on when their IDR plan anniversary date falls in the calendar.
But for other people where it actually makes more sense for them to take their current income and use it [00:13:00] to calculate their payments under the same or a new Repayment plan, they can actually apply to re-certify their income to have their student Loan payment lowered before they kick back up again.
And lastly, for today, even though there will be several tips to come after you've figured out what your payment will be and what's the best payment for you, you need to start building it into your budget.
In an ideal world, you would be in a situation where you can take the time between now and August or September and build up that muscle of making student Loan payments again, but whatever it is, you want to make sure that you're not going from August where there was no payment due to September, where you're having to come up with this new bill and haven't gotten used to it again. Because I promise you, after three plus years, it will be something that takes some adjusting to.
So I hope this information was helpful to you in connecting the dots between conversations like the Debt ceiling and how they impact you. As I've shared in the past, you'd be surprised how many areas of the economy impact student loans in an indirect or direct way. But [00:14:00] hopefully this gets you one step closer to being informed and having your student loans forgiven, reduced, reorganized, or expedited.
I'll see you next episode.
