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Alex Gonzalez, Producer
Tuesday, September 12, 2023
Many Arizonans will start making payments on their student loans again next month, so it is time for those borrowers to figure out where they stand financially. Interest resumed this month, after more than three years in which payments were paused during the pandemic. The U.S. Department of Education recently announced millions of borrowers were enrolled in the “Saving on A Valuable Education,” or SAVE, an income-driven repayment plan, including more than 87,000 in Arizona.
Robert Farrington, founder of the financial media company The College Investor, said loan payments will be calculated based on a person’s W-2 discretionary income.
“They take your income, they run it through a formula and they’ll use 225% of your state’s poverty guideline to calculate your monthly payment,” he explained. “What this means for borrowers is, those with low incomes and those with larger families will see lower payments and some people could see payments as low as $0 per month.”
Farrington added almost every borrower can benefit from the ‘SAVE’ program in the coming years, but added some will need to consolidate their loans or explore other student-loan refinancing options. A majority of borrowers were automatically enrolled in ‘SAVE,’ according to The U.S. Department of Education.
College debt is not something that solely impacts younger adults. Research from the think tank New America shows the number of people age 60 and older still repaying student loans has multiplied by six since 2004, with their outstanding debt increasing 19 times over.
Brian Walsh, senior manager of financial planning with the online personal-finance company SoFi, said older adults might have borrowed money for themselves or their children’s college, and added if the loan is for their own education, they could qualify for SAVE.
“What we try to focus as much as possible on is getting those student loans paid off as quickly as we can, because when it comes to retirement planning, the higher your expenses are, the more money you have to have saved up and the riskier it makes your retirement,” Walsh explained.
Older borrowers whose loans were taken out to help with their kids’ education do not qualify for the SAVE program. The New America research indicates about 3.5 million people over 60 owe more than $125 billion in student loans.