Financial Insights

Student Loan Update

You’ve probably seen in the headlines that, after a three-year pause, monthly student loan bills will become due again in October.  Many borrowers must come to terms with this and prepare for their payments to resume.

We wrote about student loan debt around this time last year and the Biden administration’s attempt to cancel up to $20,000 in federal student loan debt.  This plan was struck down by the Supreme Court in June.

We are writing again about the new SAVE program, which is an income-driven repayment plan that opened for enrollment last week.  SAVE bases monthly student loan payment on income and family size.  Those with federal undergraduate and graduate loans are eligible.  Payments on undergraduate loans are to be reduced to 5 percent of “discretionary income” and payments on graduate loans are reduced to 10% of discretionary income starting next summer.

SAVE does not apply to parents who borrowed using Parent Plus loans, however, parents will continue to have access to the income-contingent repayment plan through

SAVE payments are based on your earnings and household size and are readjusted each year.  If you make monthly payments for a set number of years (typically 20), then any remaining balance is forgiven.

Discretionary income is what is left after you pay for basic needs like food and rent.  The new SAVE program shields more income, 225% of federal poverty level, when compared to 150% under the existing REPAYE – pay as you earn program.

For context, single borrowers who earn less than $32,805 per year or someone in a household of four with income below $67,500 would make $0 monthly payments.  As a result, SAVE will primarily benefit low income borrowers.

One important feature of the new plan is the treatment of interest.  If a borrower’s new, lower payment, does not cover the interest owed, then the interest portion will be cancelled.

The ability to shield more income from the repayment formula and the new treatment of unpaid interest are currently in effect.  Cutting payments to 5%/10% of discretionary income don’t take effect until next July.

Starting next summer, many borrowers currently using the REPAYE program will see their payments drop by 40%.  The lowest earners may see their payments by 83% while the highest earners may only see a 5% reduction.  Borrowers currently enrolled in REPAYE will automatically be transferred into SAVE.

Another feature starting next summer is for people with smaller loans of $12,000 or less, who can make payments for 10 years before the loan is cancelled (instead of 20 years in other income-driven repayment plans).

While the above may seem reasonably straightforward to understand, we recognize that all of this gets much more complicated from a practical stand point.  Many borrowers have different types of loans, with different repayment plans and through different loan servicers.  And there are four different income-driven repayment plans (including SAVE) currently on the federal student aid website.  Some borrowers may also be in a delinquent status from before the three-year pause went into effect.

Our suggestion is to log into as soon as you can and figure out your situation.  Interest starts accruing on student loans again in September with payments due again in October.  Borrowers should receive a billing notice/statement before then.  If you were on an automatic payment plan before COVID, it will not restart automatically and you need to opt back in to set this up.  If you miss the first payment, then there’s on “on-ramp” from Oct 1, 2023 to Sept 30, 2024 where missed payments won’t be considered delinquent or reported to credit bureaus, however, the interest will be accruing and adding to your debt.  So you want to pay your bills on time and as soon as possible if you can.

If you’re already enrolled in an income-driven repayment plan, then you’ll stay enrolled in your current plan and our understanding is that all of the months of paused payments are treated as if you had paid, meaning the time counts toward the years you need to accrue to have your loan forgiven.   You’ll eventually need to recertify your income (by early 2024), but you may want to do so sooner in the event that your income has gone down or your family grew in order to lower your payment.

If you want to go directly to the SAVE program, then you can do so by clicking here.  Signing up for SAVE opened last week and it’s is expected to take about 10 minutes (once you’ve logged in with your FSA ID) and you can self-certify without needing tax documentation.  Or it may be a good idea to visit the FSA’s loan simulator as SAVE is only one of the options available (SAVE, REPAYE, ICR & IBR).

No matter you situation, now is the time to start thinking about your student loans and to figure out where you stand.  If SAVE does not apply to you, then you still need get prepared to resume your payments over the next month.  If you’re on an income-driven plan or should consider the same, then we suggest you look into SAVE as soon as possible.

If you need additional information or resources, then beyond the FSA website you can check out, or if you have multiple loans and a complicated situation, then consider engaging a student loan consultant like

The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.


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