Mark Herz: This is GBH's Morning Edition.

Starting this Friday, August 1st, interest will once again start accruing on federal student loans for millions of Americans enrolled in the Biden-era SAVE plan. As of last year, there were more than 120,000 borrowers in Massachusetts on that income-based repayment plan, many of them owing at least tens of thousands of dollars on average.

Joining us now to talk about the local impact of the changes hitting people with student loans is Betsy Mayotte, the President and Founder of the Institute of Student Loan Advisors. They're a Massachusetts-based national nonprofit that provides free student loan advice for borrowers. Good morning, Betsy.

Betsy Mayotte: Good morning.

Herz: So let's start with what's happening this Friday. What has the status of student loans been over the last few years and what's changing now?

Mayotte: Oh, boy. You know – I've been working in this industry since the Earth cooled, and the past few years have been chaotic, to say the least. And the SAVE litigation and what's happened with borrowers in the Commonwealth and nationally who are on the SAVE plan is a really great example of that. You know, all borrowers were put on hold for over three years during the COVID pause and then the Biden Administration attempted to do this really generous lower payment option, which ended up going right to court, and all the borrowers that were put into that option had their loans paused again with zero interest. And now the zero interest portion of that pause is ending. Payments are still paused for borrowers on SAVE, but interest, as you mentioned, will start accruing again on the first.

Herz: Okay, so what are you telling borrowers? What's the specific advice for people in this current situation?

Mayotte: It depends. For borrowers – so the thing about all the income-driven plans, SAVE included, although we know SAVE is dead, is that there's a forgiveness component where if you make a certain number of payments on these income- driven plans and there's still a balance, then they forgive the balance. For borrowers that are pursuing that type of forgiveness, I'm recommending they switch to another income- driven plan because this forbearance doesn't count towards that. For borrowers that are going to end up paying their loans off themselves and are paying aggressively, it's up to you. You can either switch plans or stay where you are and use this time to sort of target where your money goes. And then there's 74 other scenarios that we probably don't have time to cover in this segment.

Herz: Okay, okay. What are you hearing from people? How are people feeling? I mean, I imagine that there's people who are confused, people who are upset. What are they saying to you?

Mayotte: Yeah, I'm hearing those words a lot from the people that reach out to us for help. The word anxious comes up a lot. The word panic comes up a lot. Some of it is just confusion because of all the weird things that have happened the past few years. And some of it is “I planned my financial future off of what my payment was going to be on SAVE, and now there's no payment plan that's going to be that low, and I'm not going to be able to afford any of the payments. What do I do?” So there are a lot of scary emotions out there and they're valid.

Herz: Well, for people who feel like they're in a really extreme situation like that, that their financial life is being turned inside out, what can you tell them?

Mayotte: First of all, take a deep breath. There's almost always a solution. So thankfully with federal student loans, even with the budget reconciliation bill that just passed a few weeks ago, federal student loans do have a lot of different lower payment options. They also have deferments and forbearances. So we can almost always find a solution to help prevent people from defaulting. And sometimes we have to do a short-term solution, and then figure out a long-term solution later. But we can almost always find a solution.

Herz: And you mentioned forgiveness, which is essentially meaning your loan gets wiped out under certain conditions. And one specific program is the Public Service Loan Forgiveness Program, or PSLF, and big changes there. This was for people who work at nonprofits and people who work at schools, teachers, government employees. What's happening with this?

Mayotte: Actually, not a lot. The budget bill didn't touch it really. Although it did, through a back door, for parents that have to borrow on behalf of their children after 2026 – it effectively bars them from PSLF. It doesn't technically, but other changes make it impossible for them to get [PSLF] later. But for existing borrowers, there's not a lot changing for PSL F, which is great news. We did just have a negotiated rulemaking -- for which I was a negotiator around PSLF. The short answer is I don't anticipate them making significant changes to the program in the long run.

Herz: Betsy Mayotte, the president and founder of the Institute of Student Loan Advisors. Thank you for your expertise. My pleasure. This is GBH.

On Aug. 1 interest will start accruing again on federal student loans for millions of Americans enrolled in the Biden-era SAVE plan.

As of last year, there were more than 120,000 borrowers in Massachusetts on the income-based repayment plan, many of them owing tens of thousands of dollars on average.

GBH’s Morning Edition spoke with Betsy Mayotte, the president and founder of the Institute of Student Loan Advisors, a Massachusetts-based national nonprofit that provides free student loan advice for borrowers.

What has the status of student loans been over the last few years and what’s changing now?
 
“The past few years have been chaotic, to say the least,” Mayotte said.

All required payments for federal student loans were put on hold with a 0% interest rate in March 2020 during the beginning of the COVID-19 pandemic. The 0% interest rate ended on Sept. 1, 2023, and payments restarted in October 2023 for those on income-based and standard repayment plans.

“Then the Biden administration attempted to do this really generous lower payment option [SAVE], which ended up going right to court, and all the borrowers that were put into that option had their loans paused again with zero interest,” Mayotte said.

For those on SAVE, their loans are still in forbearance and payments are still paused, but interest will resume on Aug. 1.

If you’re a borrower currently on the SAVE plan, should you get off the plan?

It depends, according to Mayotte.

For borrowers who are working toward forgiveness either through an income-driven repayment plan or the Public Student Loan Forgiveness program, she recommends getting off the SAVE plan so you can continue making qualified payments that contribute to your progress toward forgiveness.

As for those who are paying their loans off themselves — she said it’s up to them to either switch plans to get back on track toward paying them, or use the forbearance period to use your funds elsewhere or target your income.

How can people adjust to their monthly payment increasing?

“[For people seeking loan advice] the word 'panic’ comes up a lot,” Mayotte said. She added that for some borrowers, their monthly payment is unaffordable without the SAVE plan.

For those in that situation, there is “almost always” a solution, according to Mayotte.

“Even with the budget reconciliation bill that just passed a few weeks ago, federal student loans do have a lot of different lower payment options,” she said. “They also have deferments and forbearances. So we can almost always find a solution to help prevent people from defaulting. And sometimes we have to do a short-term solution, and then figure out a long-term solution later.”

Are there any changes to Public Student Loan Forgiveness (PSLF)?

The PSLF Program is available typically to people who work full-time for a government organization, a nonprofit or in a school. It grants forgiveness to those have made 120 qualifying monthly payments under an agreed repayment plan.

“For existing borrowers, there’s not a lot changing for PSLF, which is great news,” Mayotte said. “I don’t anticipate [the current administration] making significant changes to the program in the long run.”