The best way to choose a student loan repayment plan that suits your needs.

• The U.S. Department of Education unveiled the reintroduction of two student loan repayment plans, giving borrowers additional options for managing their debt.
• Experts advise borrowers on their repayment options.

The U.S. Department of Education has recently unveiled two new student loan repayment plans, giving borrowers additional options to manage their debt.

Both the Pay As You Earn Repayment Plan and the Income-Contingent Repayment Plan are income-driven repayment plans that set monthly bills based on income and family size, leading to debt forgiveness after a specified time period.

Here's what borrowers should know about the repayment options.

Why these two plans reopened

The Education Department released the plans again, but the new repayment program, SAVE, is still being fought in legal battles.

In June 2023, the Supreme Court blocked President Joe Biden's sweeping debt cancellation plan. However, Republican attorneys general in Kansas and Missouri argue that Biden is attempting to find a roundabout way to forgive student debt through his legal challenges against SAVE.

The SAVE plan is a federal student loan repayment plan that offers two key provisions that lawsuits have targeted. It has lower monthly payments than any other federal student loan repayment plan, and it leads to quicker debt erasure for those with small balances.

The number of millennial 401(k) millionaires has increased by 400%. Biden has ended some student loan forgiveness plans. The "great resignation" has become the "great stay."

Although the Education Department has put SAVE enrollees in an interest-free forbearance while the plan is on hold, borrowers may find having a $0 monthly bill appealing. However, those hoping for loan forgiveness under the income-driven repayment plan or through Public Service Loan Forgiveness won't receive credit for the months that pass. PSLF offers debt erasure for certain public servants after 10 years of payments.

Experts suggest that those who sign up for one of the two new repayment options will receive credit.

"The SAVE Plan, which allows the Department to reduce payments for borrowers with high debts and low incomes, is being defended in court by U.S. Under Secretary of Education James Kvaal. However, the Department is also providing more financial options to low-income borrowers, teachers, servicemembers, and other public servants to help them make informed decisions about their financial situation."

How to decide the right repayment plan for you

Higher education expert Mark Kantrowitz advised borrowers in the SAVE program's interest-free forbearance to wait before making payments, as not having to pay might provide relief to those facing financial difficulties.

The forbearance may end under the Trump administration, as Kantrowitz stated.

He stated that even if you extend the forbearance period, it will not result in debt forgiveness.

To be eligible for debt cancellation under PSLF or an IDR plan, individuals may want to consider switching to one of the Education Department's other income-driven repayment plans, such as the Pay as You Earn Plan or the Income-Contingent Repayment Plan.

Before applying for PAYE, borrowers should first determine if they qualify.

The plan allows borrowers to limit their monthly bills to 10% of their discretionary income and have their debt wiped out after 20 years. Additionally, borrowers do not have to make any payments on the first $22,590 of their income as an individual or $46,800 for a family of four, according to the Education Department's Dec. 18 press release.

The ICR plan allows single individuals earning up to $15,060 to make $0 payments, while families of four can make $31,200 payments. Above these amounts, some borrowers' bills are set at 20% of their income, the Education Department stated.

Several online tools can assist you in calculating your monthly expenses under various plans.

The Standard Repayment Plan is a suitable option for borrowers who do not require loan forgiveness and are capable of making monthly payments, according to experts. Under this plan, borrowers typically make payments for a period of 10 years.