Stretching Your Dollar: What to Know About Income-Based Repayment Student Loans

<div class="block">Will Sealy, co-founder and CEO of Summer, joined Cheddar News to talk about the Biden administration&#39;s new loan repayment application, who qualifies and what applicants need to know ahead of time.</div>

Stretching Your Dollar

Well, to help us better understand Biden's income driven student loan repayment plan application. I want to bring in will Seeley who founded a company to help student borrowers will. Thank you. Thank you. All right. So let's get started. Who should apply for this plan? So anyone with a federal student loan now, unfortunately, parents who have parent plus loans are excluded. They do have other options under income based repayment plans. But for this new exciting safe program, anyone with a federal student loan, which represents about 90% of all outstanding loans out there. So chances are if you applied for a government loan, you could qualify for this program, what sort of documents do you need to prepare ahead of time to complete the application? Yes. So I think just proof of income and your last tax forms will be helpful to verify your income given that it is an income based payment plan and then just information about your state of residence and other personal information will help you successfully complete the application. And the government is saying that you can complete the process in under 10 minutes. So while it does sound laborious, it is something that can move quite quickly. Ok. Speedy. Very good. I like that. Anyone who doesn't apply that should save that 10 minutes. So I think inevitably most borrowers who are worried about struggling with their payments should definitely apply. It will help them lower their payments substantially. A borrower earning under $32,000 dollars will be eligible for a $0 payment and interest will not accrue over that time because this program is letting people have the government subsidize that interest, which is really awesome for borrowers and then anyone who's earning, for example, over that will see substantial reduction to their monthly payment by hundreds of dollars. So that's great. Yeah, what should borrowers know about this plan that we haven't covered yet? So I think there's a lot of misinformation and confusion about student loans because let's be honest, it is so complicated. Most people have over a dozen different types of loans. Some loans are from a bank, some loans are from the government bank loans are not eligible for this program inevitably don't be worried though. This program is going to help a lot of people. It's worth taking the time to actually learn about it and enroll because people will save and benefit from it. I know the student loan repayments are set to come due in October interest does start accruing in September. Correct. How should our viewers prepare for that? Yes, this is a scary milestone for millions of people. I think a lot of people were counting on Biden canceling debt that didn't go through the Supreme Court blocked it. That was a rude awakening for a lot of folks counting on that 10 or $20,000 inevitably. Now is the time to be preparing though. Don't let this sneak up on you. You do have a few weeks to start setting aside budget planning around this and programs again like this new safe plan can really help you get on your foot to start paying towards your loan. Even if it's not the full monthly payment, that would be under the traditional standard plan that people would automatically enroll in if they didn't take action on this plan today. Yes, I think a lot of people were discouraged. Obviously, borrowers when that 10 to $20,000 loan forgiveness plan didn't actually out obviously, I due to court rulings the longevity of this new plan, what should borrowers expect? Yes, I think inevitably there are going to be a lot more changes coming down the pipe. If you're interested in this plan, it's important to enroll in what's called the repay plan right now, which is automatically converting into the safe plan. So even that just sounds like wait, I'm getting confused already. If you feel that way, that is understandable. But I think as change unfold, it's possible that Biden will get cancellation passed in the upcoming year. But it's also possible that it will get sued again and end up right back in the Supreme Court. So I would say if you're a borrow today and you're having a hard time figuring things out. Don't worry, you're not alone. So we all 45 million student loan borrowers and everyone who this industry impacts. But I think the best thing you can do is just start repaying so that you don't fall behind, make the contribution save is a great way to do that. This new plan and then hope for the best that maybe debt does get canceled in the future. You know, one thing that we cover all the time down here on the floor of the stock exchange. And I'm sure that our viewers here wherever they're consuming financial news is interest rates are high, they're extremely elevated right now. How does that impact student borrower? What knowledge do they need to have when it comes to interest rates? So thankfully, for those who already have loans today, which is a huge population of 43 million federal loan borrowers among the 46 total student loan borrowers out there, their interest rates are predominantly set. And so the current raised rates by the fed are not impacting those borrowers. But if you're an incoming college student today raised rates will impact your federal loans as you turn to borrow to cover the cost of college. So just be mindful that your cost will be higher if you're in the 18 to 22 range or you're a graduate student going back for higher education, it could be more expensive for you due to those higher rates. Right? All very good notes will see. We appreciate your expertise. Thank you. Thank you.