The student loan pause is ending — for real this time. Here’s how to prepare

Come October, nearly 700,000 Washingtonians will be adding yet another monthly expense back to their budgets: federal student loan repayments.

In June, the United States Supreme Court struck down President Biden’s effort to wipe out up to $20,000 dollars in federal student loan debt for individual, qualifying borrowers. Interest on student loans will begin to accrue once again starting this Friday.

While Biden’s executive power flex didn’t hold up in court, his administration launched a new, income-driven repayment plan last week, which could lower monthly payments for millions of borrowers.

Jessica Manfredi, a student loan advocate with the Washington Student Achievement Council, she joined Soundside host Libby Denkmann to talk about what the Saving on a Valuable Education plan (SAVE) means for borrowers.

What is the SAVE plan?

According to the U.S. Department of Education, the SAVE plan, like other income-driven repayment plans, takes a borrower's income and family size, and calculates their monthly payment amount.

SAVE replaces another income driven repayment plan, the Pay As You Earn Plan. People currently enrolled in that repayment plan will be automatically enrolled in the SAVE plan, Manfredi said.

Other changes under SAVE

• It increases the income exemption from 150% to 225% of the federal poverty guideline.
• All remaining interest for subsidized and unsubsidized loans will be eliminated — after a scheduled payment is made.
• If you're married, your spouse's income will be excluded. This means you will no longer need your spouse to cosign your SAVE plan application.

Other benefits will be enacted in July 2024, Manfredi said, like reducing monthly undergraduate and graduate loan payments.

Who qualifies?

Anybody with a federal direct loan qualifies for the SAVE plan. Additionally, there’s no income cap under this repayment plan.

"That's one thing that people tend to ask us all the time: If I make too much money, am I not going to qualify?'” Manfredi said. “That's not the case.”

However, if you have another type of federal student loan, Manfredi said you do have an opportunity to consolidate your loans into federal direct loans in order to gain access to the SAVE Plan.

Parents borrowing for dependent undergraduate students via parent PLUS loans do not qualify for the SAVE plan, though.

What should borrowers do this week?

Manfredi said borrowers should take care of two action items this week, before interest accrual restarts on Friday.

The first is to update or review your contact information on both your studentaid.gov profile and loan servicer's website.

"If you don't have correct information on file, that means that you could miss important updates, things like your billing statements and due dates," Manfredi said. "So it's really important to make sure that your contact information is correct."

The second order of business Manfredi recommends is exploring repayment options to check if your current repayment plan is the best option for you.

"Federal Student Aid actually has a tool available on the studentaid.gov website called [the] loan simulator that you can use to estimate your monthly payment under different repayment plans, including the SAVE plan," Manfredi said.

And even if you don't qualify for the SAVE plan, you can still use the loan simulator to determine which repayment options you qualify for.

Listen to the full conversation by clicking the play icon at the top of this story.