Student loan interest resumes Aug. 1 for SAVE plan borrowers

Changes are coming quickly for federal student loan borrowers starting August 1st. Interest will start building again for those in the Save Repayment Plan. Financial advisor Michael Neuenschwander joins us to talk about options that borrowers have. Good morning. Thanks for joining us. Good morning, Amy. Yeah, so Michael, we know that there are millions with student loan debt out there. So first, can you talk about exactly what's happening on August 1st and who is impacted? Yeah, so as you mentioned, people that are enrolled in the Save program. So that was announced in 2023, but almost immediately tied up in courts. And so since then, they've been in forbearance, which means they didn't have to make payments, but they also were not charged interest on their loan. Well, beginning August 1st, that interest is starting to accrue. So what we've seen over the last 18 months is a lot of these programs that were there to help for student loans are sort of being unwound. And that's the big one that's starting here in just a week. Okay, so then if somebody is on that Save Repayment Plan, what actions, what can they do now before August 1st? Is there anything they should be doing? Yeah, well, obviously, it's a pretty short window here. And so the Department of Education is actually sort of reaching out, but relying on them to reach out is probably not the best strategy. So if you're in that plan, you should kind of reach out the other way, be proactive. One, you can go on to the Department of Education, use one of those calculators to see how much will it cost or what's your timeframe for paying it back. There's a few other programs that are still around. So one is called the Pay Meal Program, which is basically pay as you earn. And the other is called the Income Repayment Program, which is tied to how much you earn. It limits what your payments for student loans will be. Both of those programs, however, are also set to go away in about three years. So unfortunately, it's sort of a few moving targets that people have to stay on top of to make sure that they don't fall behind or fall into default, which is where many people are ending up. Help people. Those two that you mentioned, though, may help people sort of right now for three years, at least, kind of get on track. Where can they find more information about those repayment plans, maybe other options, and figure out sort of how to get on board with those? Yeah, so visiting the Department of Education website is the first stop. And as we said, the Income Contingent Repayment Plan is still around for at least three more years. That's the one that the current administration is encouraging people to move towards. Now, as part of the big, beautiful bill here that was passed, there is another program coming out. However, that program, while it's part of the bill, is not even put together or available for about another year. So right now, for many people, going into one of the Income Contingent Repayment Programs is the best move for now, at least to bridge you for one year until we see what the new program is actually going to be. All right, very good advice. And thank you for making that so clear, Financial Advisor Michael Nguyen-Schwander. We appreciate your time this morning. Thank you. Yeah.