The situation with student loans in the U.S. in 2024 is chaotic and uncertain. To show this, here are 5 crazy facts about student loans.
The world of student loans in the U.S. in 2024 is just wild. Long ago, it seems, people took out loans to pay for higher education, and then they paid them back over time. But then loans got out of control, so an income-driven repayment option was created.
Then a whole alphabet-soup of income-driven repayment options proliferated, with droll names like PAYE (Pay As You Earn) and REPAYE (Revised Pay As You Earn).
That was confusing enough, but then politics got involved. And now the state of student loans is inextricably linked to the political system, with the courts going to decide the fate of millions of borrowers’ repayment situations, and the future of certain programs almost certainly linked to whoever wins the next presidential election.
It’s actually crazier than that, so here are 5 crazy facts about the student loan situation in 2024. Note that some of these facts are very time-specific, so if you’re returning to this page later in time, it might be out of date. In which case, I invite you to take a look at my other coverage of student loans.
Table of Contents
1. People on the SAVE plan don’t need to pay anything (for now)
The SAVE plan is in peril. A group of Republican lawmakers has challenged this new income-driven repayment plan created by the Biden administration, and while the court decides, every borrower on the SAVE plan has been placed on an involuntary forbearance.
This means that while you’re enrolled in this plan, you don’t have to pay anything. No interest accrues either. Now that’s a “SAVE” plan indeed!
No one expects this to last, of course, but if you were hoping to extend the COVID-era break in paying, well, this is the plan for you.
2. You can apply for the SAVE plan (and then pay nothing)
This one boggles the mind, and I’m not sure I totally believe it, but if you’re not enrolled in the SAVE plan, you can apply for it today, even though the plan is put on hold and the courts may throw it out next year.
No matter. You can still apply, and if approved, you will have, in effect, applied to stop paying your student loans, at least temporarily.
3. New applications are not being processed for other IDR plans
In most cases, a borrower who wants to apply for the Income-Contingent Repayment (ICR) or Pay As You Earn (PAYE) plans is out of luck, as there are no new enrollments at the moment, except in rare circumstances.
And yet, these plans may actually become the default IDR plans, assuming that the Supreme Court throws out the SAVE plan next year. And I wouldn’t be surprised if this happens, given some of the court’s recent decisions.
4. You have to recertify, but you can’t recertify
As part of your enrollment in an income-driven repayment plan, every year you need to “recertify” your income (and family size). This means letting them know what your current situation is. You have to do this because what you pay is based on your income; the more you make, the more you have to pay per month.
Even though you have to do this every year (or else you may be kicked off of your plan, forcing you to pay much more), the Department of Education is not currently processing any recertifications at the moment.
What does this mean? As far as I can tell, this means nothing. You will stay on your plan even without recertification. But all the same, you still want to attempt to recertify. Eventually, they’ll start processing again, right?
5. Borrowers will have the option to “buyback” missed months toward loan forgiveness
Follow me on this as best as you can. One of the benefits of certain IDR plans is that after a certain number of months of payments (totaling 20 or 25 years, depending on the plan), your loans will be forgiven. So it’s not just that you pay less per month; you can pay less overall!
Because of this, the number of months where you have made eligible payments matters a lot. And so making sure your payments count matters too.
Unfortunately, during this pause, those on the SAVE plan aren’t accruing months toward loan forgiveness.
That said, the Department of Education is creating something called a “buyback” option, where you will (allegedly) be able to get credit for months in the past where you didn’t credit at the time.
There are some pretty strict details on who and when you can do this, and the process isn’t even live for all borrowers (just those in the Public Service Loan Forgiveness plan). Just be aware that even if some months don’t count toward loan forgiveness now, that may change later. So please, try to keep track of what you paid and when!
It’s a wild ride
As you can see, the student loan situation is crazy right now. The sad thing is that none of this even comes close to getting to heart of the problem itself, which is why higher education is so expensive in the first place. You solve that problem, and all of these other problems go away too.
But in the meantime, if you’re a borrower, try to stay buckled up. This ride isn’t over yet.
