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Get ready to start paying student loans again. President Biden’s sweeping plan for student loan relief is currently at the Supreme Court, and whatever the ruling, repayment is likely to start this summer. While everyone’s attention has been on debt cancelation, the Biden administration has also made moves to change how exactly borrowers repay their loans. Under the new income-driven repayment program, some of those bills could even be cut in half. Here’s what to know about potential changes to your student loan repayment plan.

What the new repayment plan means for you

Earlier this year, the Education Department outlined the details of its revised income-driven repayment plan. Compared to other types of loans, income-driven repayment plans are based on a borrower’s income, not the amount borrowed. Currently, the Revised Pay As You Earn Repayment, or REPAYE, Plan requires borrowers to pay 10% of their discretionary income a month. Also under the current REPAYE Plan, that discretionary income is calculated as money earned over 150% of the federal poverty guideline.

Under the new REPAYE plan, student loan borrowers wouldn’t need to make payments based on income earned until it hit 225% of the federal poverty guideline. What’s more, borrowers would be required to pay just 5% toward their loans. This means most borrowers would see their payments cut by at least half.

What could this look like for you? CNBC provides an example of how monthly bills could change with the new plan:

  • Right now, a borrower making $40,000 a year has a monthly student loan payment of around $151. Under the revised plan, their payment would drop to $30.
  • A borrower earning $90,000 a year has a monthly student loan payment of around $568. The revised plan brings that down to $238.
  • Borrowers earning less than about $32,800 individually (less than $67,500 for a family of four) would see $0 monthly bills.

Both the existing and the revised REPAYE Plan have the same repayment timeline: For undergraduate student loans, any leftover debt is forgiven after 20 years of payments. For graduate or professional student loans, the repayment period is 25 years.

While debt cancelation would provide substantial relief to existing borrowers, the revised REPAYE Plan could help current and future college students for years to come. (In more college savings news, next year you can rollover unused funds from your kid’s 529 plan into a Roth IRA for them.)

The new REPAYE Plan could officially be available July 1, 2024, with some elements implemented sooner, according to CNBC. This gives borrowers plenty of time to figure out how it will apply to them. Once the new REPAYE Plan is available, borrowers can apply at StudentAid.gov.

For now, don’t let the return of student loan repayments catch you off guard; start taking steps now to get your repayment plan in order.



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