Colorado financial expert on what borrowers should consider as SAVE program expected to end
More than 7 million student loan borrowers enrolled in the SAVE plan need to change their payment plans for their federal student loans. In December, the Trump administration reached an agreement that would end President Biden's student loan repayment plan. Now, as millions of student loan borrowers are being forced back into repayment, a certified financial planner offers tips for what borrowers should consider.
As part of the deal, pending court approval, the Department of Education stated that all current SAVE borrowers will have a limited time to enroll in a new plan and begin repayments. They'll also deny all pending applications.
Robert Persichitte, a certified financial planner at Delagify Financial in Arvada, says now is the time to get a plan in place so you're prepared and don't fall behind on your payments.
"As you're looking at the new plan, really understand how that interest is going to affect you, because it's going to be very, very different. A lot of borrowers on the SAVE plan are going to have some benefit based on income from that interest rate. This can be a decision that sticks with you for the rest of your life. So have an internal decision, be in control, and know how you're going to be tackling those payments and taking care of those payments going forward," said Persichitte.
Persichitte recommends being proactive and logging into your federal student aid account and see how you're impacted. If there is going to be a difference in payments, set a budget. Go back to the basics of financial planning and consider what you need and what you can cut out.
"Focus on the short term. First, make sure that you can pay your bills and make sure that you're not going to be kicked out of your house. Then focus on the long term and say, 'how can I get out of this? How can I make these payments over time in a way that's not going to drastically increase my interest,'" said Persichitte.
Also, consider what your goals are. Persichitte says he sees more success in people tackling one financial debt at a time.
"If you're paying your student loans and saving up for a house, that's going to be very difficult. You must balance and prioritize how you're going to do it, and for some people, tackling problems financial for some people, tackling financial problems one at a time becomes more manageable," said Persichitte.
The Department of Education is advising SAVE borrowers to use the federal student aid loan simulator tool to explore other repayment plans. The repayment assistance plan is also a new income-driven repayment plan. That plan will be available for new borrowers starting in July, along with a separate standard repayment plan.
