Consumer Alert: A new student loan repayment plan could reduce your monthly payment

ROCHESTER, N.Y. – Bankrate recently asked Americans about their biggest financial regret. A quarter of those with student loan debt said borrowing too much for college is the thing that keeps them up at night.

Student loan payments have been on pause for more than three years, but that’s over. Interest started accruing on your debt this month, and next month you have to start making payments. Taking on tens of thousands of dollars of debt for college can affect your financial decisions for years to come.

In a Bankrate survey, two thirds of those with student loan debt said that given the choice, they would do something differently to avoid getting in debt. While 59 percent of borrowers with a degree say education has bolstered their income and careers, just as many say they’ve been forced to delay a significant financial decision.

Bankrate analyst Sarah Foster recently wrote about the issue. She says The White House has made changes that could significantly lower your monthly payment.

“So, the SAVE plan is a new income-driven repayment plan,” said Foster. “It’s based on how much money Americans make, and the Biden administration has said that it’s the cheapest option out there so far. And the reason why is it shields more of your income from being calculated as discretionary.”

And if the money is counted as necessary not discretionary, your payments will be lower. The new formula takes inflation into account.

So, with the help of Bankrate, here’s Deanna’s Do List:

• Log into your account and find out who your servicer is. It may have changed during the pandemic.
• Find the right payment plan for your situation and apply quickly. There may be a backlog since so many others will be doing the same thing.
• And never sacrifice your long-term goals to pay off the debt more quickly. Your retirement savings is likely earning compound interest. Foster gives the following example: An American who puts $200 into an investing account a month starting at age 22 could earn as much as $1.2 million by the time they’re 70, assuming an 8 percent annual return, Bankrate calculations show. That falls to about $703,000 if Americans can only afford to contribute half of that amount for their first 20 years of investing, assuming that’s how long it takes them to pay off their debt.