Post Election: What to Do if You are Waiting on SAVE for Federal Student Loan Forgiveness!

Hello, my name is Kristi Arkovich. I am the founder of Arkovich Law, located here in Tampa, Florida, and we specialize in bankruptcies, consumer debt, student loans, things of that nature. I know there's a lot of people who have been on forbearance lately, and the reason for that is because the Department of Ed has basically stayed the processing of various programs, including the SAVE IDR plan, which is under a current stay or injunction imposed by a couple of courts. And so we have a lot of folks who want to get on with things. I've been contacted recently by people that want to actually pay their loans down, pay them off, get back on track with IDR. They don't really want to be on forbearance forever, not knowing the end result of SAVE, and I think a lot of people suspect that SAVE may not survive. Now we've had the election. As of last night, Donald Trump is the president-elect to be inaugurated in the office the end of January. What will that mean for SAVE? We previously thought SAVE would not survive, and we continue to think that. And so for those who want to get on with their lives, if you do not want to take advantage of this SAVE forbearance while that program is enjoined, you might want to consider a different program, a different IDR, to get credit towards forgiveness. IBR, income-based repayment, is a plan that was passed by Congress in 2009. And the importance of being passed by Congress is it can't be overstated because that's something that you cannot easily take away unless you have a congressional vote to do so and all the different hoops to be jumped through to do that. And so IBR is a very good plan. It is something that both fell, federal family education loans, the older federal loans, as well as direct loans are eligible for, so that's good. It allows you to file a separate tax return to exclude your spouse's income. That's huge. That was one of the advantages of SAVE, unlike the predecessor to SAVE, which was called repay. No matter how you filed your tax returns under repay, it would count both incomes if you're married. And that was potentially devastating, and a lot of folks did not want to, you know, basically have their spouse liable for their loan. I mean, they're not liable directly, but their income is taken into account to determine what the family will pay towards that loan. And so IBR has that protection, much like SAVE did. And again, it can be used for federal direct loans. So with IBR, the reason why a lot of folks preferred SAVE over IBR is that SAVE had an interest subsidy that was larger than what the interest subsidy under IBR is. Under the interest subsidy for IBR, it's limited in both duration and so forth. And so SAVE is not. Basically, SAVE is a program that's monthly. It would be determined on a monthly basis that if your payment was not enough to pay interest, the interest would not accrue month to month. That can happen under IBR. So that's one disadvantage of IBR is that you can have interest accrual beyond what is subsidized for the first three years and so forth. There's other aspects of IBR that was not quite as good as SAVE, and that is the amount of the payment. Under SAVE, the payment would be 10 percent of discretionary earnings or 5 percent for undergrad, which was to go in effect in July. It never actually did take effect because of the injunctions. Where IBR is 15 percent of discretionary earnings, so 15 versus 5 or 10, obviously that's a bigger payment. But there are ways to reduce your payment under IBR, much like SAVE, where you can use alternative pay information. You can use pay stubs instead of a tax return if you have irregular pay or bonuses and things. You can deduct a retirement savings. So any contributions to 401K, traditional IRAs, health savings account, 403B, anything that basically will lower your AGI will in turn lower your IBR payment. So there are ways to get that payment down to something that is affordable. And there is basically, you know, the opportunity to go ahead and start the IBR credit now, potentially gaining, you know, six more months if it's six months until we know the answers to whether or not SAVE will survive or not. If for some reason SAVE does survive, you can switch from IBR to SAVE when that happens. Now, if the IBR payment is too high and you'd rather stand forbearance, that's fine. That's an option that's available currently now. We don't know when and if it will go away. It is presumably interest-free. Basically, we've heard that as long as you have this application for an IDR, that there is no interest accrual during this forbearance. But there's no, basically, accrual towards IDR time either. And that's why we're saying that maybe you want to get on the IBR now and go ahead and get things going, get things started. Do know that it is a 20 or 25-year forgiveness period. So in other words, once you're making payments or have some kind of credit for IDR during that time, at the end of 20 or 25 years, you would be forgiven. And then public service still applies where your forgiveness occurs after 10 years if you're in IBR or some other plan. And so public services, that's basically 120 months. And that's another program that was passed by Congress. We don't expect IBR or public service loan forgiveness to go anywhere. We think that they will be around for the long haul. And so please keep them in mind and take advantage of those opportunities to obtain loan forgiveness where you can. So I hope this has been helpful. Again, this is Christy Arkovich here in Tampa, Florida. We do do strategy sessions for anyone who wants us to look specifically at your loans, go over options you might have. You can reach us at info at christyarkovich.com or call us at 813-258-2808. We do charge for those. We also can file bankruptcies for those in the surrounding areas around Tampa Bay. For those bankruptcy plans, we do look specifically for folks who are in the current area that we can actually help and file a bankruptcy for. For other things, it's a federal law. So we can, I mean, it's the same no matter where you are, Alaska, Wyoming, here, what have you. And if you have private student loans, there is a possibility of settling them. And if you do so before July, I mean, before December 31 of 2025, remember the tax forgiveness where you don't have taxable, you don't have a taxable event for the forgiven balance. As long as you get that paid before the end of 2025, you will not have a taxable event federally. So don't forget that that option exists for federal loans. That was one of the job stimulus bills. I think it was American Rescue Plan or some such name. We don't expect that to go anywhere either. And so I hope you all have a wonderful day and thank you for listening.