The new plan would also allow more low-income workers to qualify for zero-dollar payments thanks to a tweak in the payment formula, which would benefit all borrowers enrolled: The administration plans to increase the amount of income deemed necessary for basic expenses, which means it’s shielded from the calculation. As a result, no borrower earning under 225 percent of the poverty level — or what a $15 minimum wage worker earns annually — will have to make a payment, the administration said.
There’s more: Unlike other existing income-driven plans, borrowers’ loan balances will not grow as long as they make their monthly payments, even when they are not required to make any payments because their income is too low.
That will provide a much-needed dose of mental relief to borrowers who diligently make payments yet still see their balances balloon over the decades because they’re not paying enough to cover the interest.
When can I sign up for the new income-driven repayment plan?
Those details haven’t been released yet. The administration has the authority to create new plans on its own, but it will still need to clear some procedural hurdles. Then, the loan servicers will have to get their systems ready.
Where can I get help choosing the best repayment plan?
Analyzing the plans can be excruciating, but there are tools and services that can help. The loan simulator tool at StudentAid.gov will guide you through the options and help you decide which plan best fits your goals — finding the lowest-payment plan, for example, versus paying loans off as soon as possible.
It’s easy to use. When you sign in, it should automatically use your loans in its calculations. (You can manually add other federal loans if any are missing.) You can also compare plans side by side — how much they’ll cost over time, both monthly and in total, and if any debt would be forgiven.
Besides your servicer, groups like the Institute of Student Loan Advisors, known as TISLA, can provide free guidance on what options may work best for you. For New York State residents, EDCAP, a nonprofit focused on student loans, also offers help. And some employers and other organizations have hired companies like Summer, which helps borrowers sort through the options.
Ron Lieber and Tara Siegel Bernard
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