Navigating Student Loan Repayment: Smart Budgeting Strategies as Payments Resume

Before the current forbearance period ends, borrowers under the Saving on a Valuable Education (SAVE) plan would do well to start preparing for their future loan payments early. There are a few budgeting strategies that you can employ, such as cutting unnecessary expenses and comparing other repayment options, to ensure you’ll be able to afford your student debt payments.

Key Takeaways

• While borrowers on the Saving on a Valuable Education (SAVE) income-driven repayment (IDR) plan currently have their loans in forbearance, the 8th Circuit court may ultimately rule against the legality of the plan in the coming months.
• If that happens, the incoming Trump administration is unlikely to appeal the decision. This means the SAVE plan could cease to exist.
• Borrowers on the SAVE plan would need to choose a new repayment plan at that point, which could be another IDR plan.
• Whether you have federal or private student loans, smart repayment practices like using a written monthly budget and cutting unnecessary spending can help any borrower stay on track with their debt payments.

The Future of the SAVE Plan

The Biden-Harris administration launched the Saving on a Valuable Education (SAVE) income-driven repayment (IDR) plan in August of 2023 with the goal of reducing student loan payments for most borrowers and paving the way for more student loan relief overall. This plan promised lower monthly payments (5% of discretionary income) for undergraduate loans, plus a higher income threshold to qualify for $0 monthly payments and forgiveness of remaining loan balances after 20 to 25 years.

However, several court actions have put the SAVE plan in peril, including a federal court injunction that prevented full implementation of the plan in mid-2024. While borrowers wait for the courts to decide the plan’s fate, all loans in the program have been put into an interest-free forbearance that doesn’t count toward the timeline for loan forgiveness. This has left many borrowers in limbo as they wait to see what happens with their loans, and how much they’ll owe each month when payments finally resume.

With an incoming President Donald Trump to inherit the legal fight over the SAVE plan, whether the 8th Circuit court rules against the legality of the plan may end up being moot. After all, if it isn’t struck down, the Trump administration can then choose to phase it out.

Past statements and actions from Trump paint a grim picture for the future of student loan forgiveness, especially since he proposed ending the Public Service Loan Forgiveness (PSLF) program during his first term. Trump has also promised to abolish the United States Department of Education in its entirety, which leaves the future of the current federal student loan repayment options and forgiveness programs uncertain.

Note

The landscape for federal student loans has been tumultuous over the last few years, between pandemic-era payment pauses, the Biden administration’s original debt debt relief plan being struck down, the ongoing litigation surrounding the SAVE plan, and the Education Department’s uncertain future.

As borrowers on the SAVE plan wait to see what happens, it makes sense to prepare for monthly student loan payments to resume.

4 Budgeting Tips for Managing Your Student Loan Payments

Start Using a Written Monthly Budget

Use a pen and paper to write out a monthly budget that includes your expected income for the month along with your estimated expenses. You can do this by creating two columns—one with your anticipated monthly gross income and the other with your regular bills and other expenses.

While some bills are set in stone (i.e., your rent and car payment), you’ll have to estimate how much you spend each month on things like groceries, gas, and dining out. Also make sure to account for an estimated student loan payment in your budget.

Ultimately, this exercise lets you see how your expenses compare to your income, and you can use this information to determine what changes (if any) you’ll need to make once student loan payments resume.

Look for Ways to Cut Spending

One of those changes could be cutting spending altogether, especially in discretionary categories where you have some control. You may be able to free up cash for student loan payments by reducing how often you dine out, spending less on groceries, dropping any subscription services you can live without, etc.

Explore Other Repayment Options and Plans

With the SAVE plan currently on hold, it makes sense to be thinking about and comparing other repayment plans for your student loans. In addition to other IDR plans, such as the Pay As You Earn (PAYE) Plan and the Income-Based Repayment (IBR) Plan, consider what your monthly payment for student loans might be on the standard, 10-year repayment plan. The best way to compare these options is with the Loan Simulator on Federal Student Aid’s website.

Consider Consolidating Your Loans

Additionally, it’s worth thinking about consolidating or refinancing your student loans with a private lender. While this would mean missing out on the protections available for federal student loans, including deferment and forbearance, it may help you get a lower monthly payment, a lower interest rate, or both. Just note that, once your student loans are refinanced with a private company, they will no longer be eligible for loan forgiveness.

The Bottom Line

While the SAVE plan is being debated in the courts, it makes sense to consider what your next steps might be. If SAVE is ultimately struck down, you’ll need to figure out another way to repay your student debt. This would likely involve choosing another repayment plan and potentially refinancing or consolidating your debts.

By comparing options now and taking stock of where you’re at financially, you’ll be in a better position to handle student loan payments when they resume in the future.