From Forgotten Servicers to Financial Freedom: Navigating the Return of Student Loan Repayments

Which Repayment Plan Will you be Placed on Unless You Change It?

Student loan repayments are about to resume following a three year hiatus. During this time there have been some changes made to servicers. With payments being on a pause for so long and servicers switching hands, some people don’t even know who their servicer is!

If a borrower has a federal student loan, they will automatically be placed onto the Standard Repayment Plan and will remain on it until they switch to another plan. Eligible loans include various types of direct loans, subsidized and unsubsidized loans, PLUS loans, consolidation loans, and certain loans from the FFEL Program (which stopped issuing new loans after July 1, 2010).

What is the standard repayment plan?

The Standard Repayment Plan is a basic repayment option for loans from the William D. Ford Federal Direct Loan Program and Federal Family Education Loan Program. It involves fixed monthly payments made for a period of up to 10 years (or between 10 and 30 years for consolidation loans). While the monthly payments are slightly higher than other plans, this plan allows borrowers to pay off their loans in the shortest time, with the least amount of interest paid over the loan's lifespan.

Under the Standard Repayment Plan, monthly payments are fixed at a minimum of $50 for up to 10 years (except for consolidation loans, which can have a repayment period of 10 to 30 years). The length of the repayment period for consolidation loans depends on the total education loan indebtedness, which includes the consolidation loan amount and other student loan debt.

What does this mean for borrowers?

Borrowers will be placed onto the Standard Repayment Plan automatically on resumption of their federal student loan repayments. Whilst this option will usually mean that the borrower pays less in interest because of this usually being a higher payment, a higher payment could be problematic.

Borrowers should consider their own individual circumstances when deciding on repayment plans. If a higher payment is likely to be problematic for them, then they should consider looking into other repayment plans since the Standard Plan will not guarantee the lowest repayment amount.

What can be done to help?

Financial wellness companies, banks and employers can assist borrowers by providing them with the tools, support and guidance that they need to navigate their way through this resumption period.

Payitoff have embeddable tools that will allow you to provide your customers with whitelabelled debt guidance to help them stay on track with their student loan repayments, avoid defaults and ensure that their financial wellness is not impacted by the pending changes.

If you want to provide student loan debt guidance to your customers - across all servicers - then contact Payitoff to discuss our range of solutions.