The Biden administration has forgiven another $1.2 billion in student loan debt for about 153,000 borrowers enrolled in the Saving on a Valuable Education (SAVE) repayment plan.

To be eligible for this debt relief, SAVE enrollees must have been making at least 10 years of payments on a federal student loan of $12,000 or less, the Department of Education (DOE) said. 

Eligible borrowers should have begun to receive emails this week from President Joe Biden letting them know that their loans are forgiven and that they will not need to take any further action to receive relief. Next week, the DOE plans to begin to email borrowers who can become eligible for loan cancellation if they switch to the SAVE plan.

This part of the plan was originally set for implementation in July but the administration announced last month that it would accelerate the timeline. The DOE said it will implement the remaining benefits of the plan, however, in July.

Launched last August, the SAVE student loan plan is an income-driven repayment (IDR) plan that calculates a borrower’s monthly payment using monthly income and family size as key determiners.

The latest action brings the administration's total student debt cancellation, under various programs, to almost $138 billion for nearly 3.9 million borrowers. This includes $4.8 billion in loan forgiveness for roughly 80,000 Americans in December 2023 as well as $9 billion in loan forgiveness for about 125,000 Americans in October 2023 — both through fixes to IDR and Public Service Loan Forgiveness programs.

President Joe Biden launched the program following the Supreme Court's decision last June to reject his sweeping $400 billion student loan debt relief plan, a key part of his campaign promise to help borrowers get out of debt. Last October, federal student loan payments resumed after a three-year, pandemic-induced hiatus.

The DOE's Federal Student Aid Office offers a step-by-step guide on repaying student loans with tips including how to review your loan balance, choose a repayment plan based on your income as well as various loan forgiveness options.

Other government resources include the DOE's Benefits.Gov, which a wealth of information on various loan programs offered by the federal government.

Related Content

• Student Loan Debt: Another $4.8B Forgiven
• $9 Billion More in Student Loan Debt Forgiven
• Student Loan Borrowers To See Better Protections Under New Rules
• A Little-Known Tax-Free Way To Help Pay Your Student Loan

The Biden administration plans to forgive $9 billion in student loan debt for about 125,000 Americans “through fixes to income-driven repayment (IDR) and Public Service Loan Forgiveness, and by canceling debt for borrowers with total and permanent disabilities,” the White House announced on October 4.

The $9 billion in forgiven loans consist of $5.2 billion in debt relief for 53,000 borrowers under the Public Service Loan Forgiveness program, nearly $2.8 billion in new debt relief for about 51,000 borrowers through fixes to income-driven repayment, and $1.2 billion in relief for about 22,000 borrowers who have a total or permanent disability.

The announcement came just days after the October 1 resumption of student loan repayments after a three-year hiatus.

The borrowers who qualified for relief from fixes to IDRs had made 20 years or more of payments, “but never got the relief they were entitled to,” the White House said. It added that the borrowers with total or permanent disabilities were identified and approved for discharge through a data match with the Social Security Administration.

The administration has now approved $127 billion in debt cancellations for nearly 3.6 million borrowers to-date, the White House said.

Earlier this year, the Supreme Court struck down President Joe Biden’s signature loan forgiveness plan. The administration had wanted to forgive up to $10,000 of student loan debt for eligible borrowers, and up to $20,000 in student loan debt for eligible Pell Grant recipients. 

Since then, however, the administration has forgiven some student debt in several areas. These include the cancelling of $37 million in debt last month for about 1,200 students enrolled at the University of Phoenix, which was found to have a national ad campaign that misled prospective students.

Loan repayments begin

To prepare to start paying your student loans back, you’ll want to start by getting the facts straight by logging into your account at StudentAid.gov to review the list of all your federal loans, as Kiplinger previously reported. Check your loan details, make sure your contact information is correct, and review your financial information to make sure everything is up-to-date.

Related Content

• What Happens When Student Loan Payments Resume?
• $39 Billion in Federal Student Loans Will Now Be Forgiven
• How Long it Actually Takes to Pay Off Student Loans

The Biden administration has launched a beta version of a student loan repayment plan for any college student who took out a federal student loan.

The new plan, Savings on a Valuable Education (SAVE), replaces the administration’s Revised Pay As You Earn (REPAYE) program. REPAYE participants will automatically qualify for SAVE, the Department of Education (DOE) said.

SAVE is an income-driven replacement plan that calculates a student loan borrower’s monthly payment number, using the borrower’s monthly income and family size as key payment determiners. 

Federal student loan borrowers interested in the SAVE plan can file immediately and receive an email confirmation once the application is submitted.

The application process is convenient, says Robert Farrington, founder and CEO of The College Investor in San Diego. “Borrowers also don’t need to re-apply each year because the [StudentAid.gov] website is able to access tax returns to see which plans and benefits they qualify for under the plan.”

The plan includes borrowers with direct subsidized loans, unsubsidized loans, consolidated loans, and PLUS graduate loans. Similar to the REPAYE program, the SAVE has a payment lid based on the borrower’s discretionary monthly income. While REPAYE had a 10% cap on discretionary income, that number will slide to 5% beginning in the summer of 2024.

The SAVE plan boosts the student loan repayment income exemption from 150% to 225% of the poverty line, the DOE said.

“That means you won’t owe loan payments if you are a single borrower earning $32,800 or less or a family of four earning $67,500 or less,” the agency said. “Borrowers earning more than these amounts will save at least $1,000 per year, compared to the current income-driven repayment plans.”

While how much money a borrower saves depends on annual income and family situation, a borrower with no dependents and a $38,000 annual income will save $91 per month under SAVE, according to the DOE.

Student loans account for a lot of debt

In addition, the loan balance amounts of borrowers who make a monthly payment will not rise because of unpaid interest. For example, if a borrower makes a $30 payment, and $50 in interest accumulates, the difference between the $50 interest and the $30 payment will not be added to the borrower’s loan balance, DOE said.

The plan also eliminates spousal income for married student loan borrowers who file separately, and so there is no longer a requirement for a spouse to co-sign an income-driven replacement plan.

The SAVE plan rolls out at a time of high anxiety for student loan borrowers.

“According to White House estimates, more than 45 million borrowers across the country are borrowers shouldering more than $1 trillion in collective federal student loan debt,” says Jonathan McCollum, chair of federal government relations for Davidoff Hutcher & Citron in Washington, D.C. “Educational loans account for 9.5% of the nation’s consumer debt, second only to mortgages.”

The SAVE plan offers some relief for borrowers after the Supreme Court ruling that ended President Joe Biden’s original student loan forgiveness plan.

“SAVE decreases the size of required payments by half – 5% of monthly discretionary income, down from 10%,” McCollum says. “Borrowers who earn less than 225% of the federal poverty level will no longer have to make monthly payments, and balances will no longer increase on account of unpaid interest, as long as monthly payments are made.”

Borrowers with original loan balances of $12,000 or less will also see their balances forgiven in half the time, he said, adding that this can amount to 10 years instead of 20.

•  How to Prepare to Start Paying Student Loans Again
•  $39 Billion in Federal Student Loans Will Now Be Forgiven 
•  Student Loan Forgiveness: What You Need to Know

If you’re among the millions of borrowers who took advantage of the hiatus on federal student loan payments, it’s time to tighten your belt. With the Supreme Court’s June decision to strike down President Joe Biden’s student loan forgiveness plan — which would have given qualifying borrowers up to $20,000 in federal student debt relief — and repayments beginning in October, you’ll need to make monthly payments again soon.

The thought of parting with that cash might evoke the same sense of dread you felt during your final exams in college. Yet, just as in those college days, the more you prepare, the better off you’ll be. 

Get the facts straight on student loan payments

A lot has happened since loan payments and interest accrual were first suspended in early 2020: A pandemic swept the globe, a new U.S. president took office, and civilians went on the first trip to space without any professional astronauts. Much has likely happened in your personal life as well. Perhaps you moved, landed a new job or got married. Maybe all three. 

In the meantime, there’s a good chance you may not remember who your student loan servicer is or how much you owe. In addition, your home address, e-mail address and bank information may have changed. On top of that, you may have a new loan service provider or platform. More than 17 million accounts for federal student loans have been transferred, and more transfers — either to different servicers or different servicing technology platforms — are expected in the coming months, ultimately reaching more than 30 million accounts, according to a June report from the Consumer Financial Protection Bureau. 

Start by logging in to your account at StudentAid.gov to review the list of all your federal loans and get details about them, such as the service provider’s name, how much you’ve paid, and your remaining balance. Make sure your contact information is correct so you’ll receive important notices. You should also go to your service provider’s website to review the financial information there and, if needed, update your personal data. 

Listing accurate contact information is crucial, says Mark Kantrowitz, a student loan expert and author of How to Appeal for More College Financial Aid. “The repayment is going to restart regardless of whether you get those notices or not,” he says. “If you miss a payment or you’re late, you’ll be charged penalties, and the interest will accrue.”

If you can’t find answers to your questions online, call the Federal Student Aid Information Center (FSAIC) at 800-433-3243 or your loan provider for assistance. Congress didn’t approve a call-center-related funding request from the Department of Education, so hours of operation have been cut. Don’t procrastinate on making this call, or you may need to wait to get a live person on the line.

Reassess your budget to pay student loans

During the pause in payments, many borrowers used funds previously designated for student loans for other purposes. It’s now time to take a hard look at where your money is going and, if necessary, slash your expenses. Track your spending for a month and scrutinize those numbers, Kantrowitz recommends. Determine what is need-based, or mandatory, and what is want-based, or discretionary. Some of those discretionary purchases may have to go by the wayside so you can afford your loan repayment. 

Make sure you’ve signed up to have payments transferred from your bank account to the loan servicer automatically. With automatic payments, not only are you less likely to be late with a payment, but you’ll also get a quarter of a percentage point interest rate reduction. 

Review your student loan repayment options

The DoE offers several repayment options, each with its own nuances. They include the standard repayment plan, the graduated repayment plan and income-driven repayment plans (IDR). With IDRs, payments are based on your income.

Your loan servicer or a financial adviser can walk you through your choices and explain the pros and cons of each. The DoE’s loan simulator is also a useful tool. It will let you see the plans you might qualify for and help you estimate your monthly and total loan payments. 

To protect against pay cuts, furloughs and unemployment, federal loan borrowers may want to consider an IDR plan, says Ross Riskin, chief learning officer at the Investments & Wealth Institute. You can adjust your monthly payments — to as little as zero if your income is low enough — without having to go through the arduous process of negotiating with a bank or lender, he says. Income-driven plans have additional benefits, such as potential loan forgiveness after 20 to 25 years of payments. However, you may also end up paying more in interest in the long run. 

If you’re already enrolled in an IDR plan, compare your current income to what it was the last time you had to recertify, which was likely before the payment pause. If your income is lower now, submit income information to have the monthly payment amount adjusted downward, Riskin says. 

As you explore repayment options, be wary of any offers to refinance, as the only way to refinance a federal loan is to take out a new private loan to pay off the existing student loan balance, Riskin says. Some private loans have variable interest rates, while federal student loans come with fixed rates. Although a private loan may have a lower rate, you’re likely to lose many of the benefits that come with federal loans, such as the potential for forgiveness or forbearance or the opportunity to use repayment plans based on your income. You’ll also lose the opportunity to obtain loan forgiveness under the Public Service Loan Forgiveness (PSLF) program.

The PSLF program is designed for those who work in public service in federal, state, tribal or local government or for a nonprofit organization. The program forgives the remaining balance on certain loan plans after you’ve made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for an eligible employer. You can determine whether your employer qualifies for PSLF by typing in your organization’s name on the PSLF website.

Cushion the blow

In addition to PSLF, there are other ways an employer can help you foot your student loan bill. Under an updated provision in the Coronavirus Aid, Relief and Economic Security (CARES) Act, employers can provide annual educational assistance of up to $5,250 per employee to help repay qualifying student loans. The money is free from federal income taxes, too.

And starting in 2024, employers will be able to make matching contributions to retirement plans such as 401(k) and 403(b) accounts for employees who make qualified student loan payments of a certain amount on an annual basis. 

You can also soften the economic blow by earning more money. It’s still a tight labor market, so now could be a good time to make your case for a raise. Just keep in mind that if you’re in an income-based student loan plan and make more money, your monthly loan payment may increase after you recertify your income. 

Where to get help with student loans

If you have crunched the numbers and investigated ways to get additional cash but money is still tight, you still have options. Ask your loan provider whether you should consider unemployment deferment, economic hardship deferment or forbearance.

You must be out of work to qualify for unemployment deferment. You may qualify for economic hardship if you’re receiving federal or state public assistance, you’re a Peace Corps volunteer, you’re working full-time but earn the federal minimum wage or less, or you have income that’s less than or equal to 150% of the poverty line for your family size and state ($29,580 for a two-person household).

With forbearance, principal payments are postponed, but interest continues to accrue. You can pay the interest as it accrues or allow it to accrue and be added to your loan principal balance at the end of the forbearance period. 

Both of the deferment options, as well as general forbearance, are available for up to three years, and you can use a combination of deferments and forbearance for up to nine years. 

Repaying federal student loans may feel stressful, but ignoring your obligation will add even more angst to your life in the long term. If you don’t make payments, the loan will eventually go into default, which can have disastrous consequences. Your credit will be ruined, which will affect all other outstanding debts and make it hard to get any other loans. Worse, your wages can be garnished up to 15%, and if you’re still in default when you retire, your Social Security benefits can be offset up to 15%. 

“Don’t take the ostrich approach,” says Kantrowitz. “If you ignore the problem, it just gets worse.” 

Help for borrowers who fell behind

If you were one of the 7 million borrowers in default before the federal loan payment pause, there’s good news for you. A Department of Education program called the Fresh Start initiative will set your loan status as current on payments, restore your eligibility for federal student aid and remove the default from your credit history. Opting in to Fresh Start can have far-reaching positive effects. Your credit score could increase, enabling you to get lower interest rates on a variety of loans, from mortgages to car loans. 

Note that Fresh Start has a time limit: You must make payment arrangements within one year of the end of the payment pause. To take advantage of the program, contact your loan holder or the DoE. For more in­formation, you can also call the DoE’s Default Resolution Group at 800-621-3115. Keep in mind that if you don’t make payments after a year, the loans will go back into default.

Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• Student Loan Forgiveness: What You Need to Know
• How Long it Actually Takes to Pay Off Student Loans
• Should Paying Off Student Loans Be a Priority? What to Consider

President Biden made a long-awaited announcement extending the more than two-year-old pause on student loan payments through the end of this year. The Federal government will also provide student loan debt cancellation of up to $10,000 per borrower, within specific income limits, and up to $20,000 for Pell Grant recipients. To be eligible for forgiveness, student loans must be held by the Department of Education.

The information came August 24, a week before the current pause on student loan payments was scheduled to expire. And while some borrowers will welcome the news of the student loan payment pause extension and student loan forgiveness, the latter raises an important question. Will student loan cancellation hurt your taxes?

The short answer to whether you will pay federal income taxes on student loan forgiveness is no. And that' more good news for the millions of borrowers who will be eligible for student loan relief under President Biden’s plan. But it's still helpful to know why the student loan relief won’t be taxable to you.

2022 Student Loan Cancellation

Under President Biden's student loan debt cancellation plan, the Department of Education will provide student loan relief up to $10,000 to borrowers whose loans are held by the Department of Education, and whose income is less than $125,000 per year. For married couples who file jointly, the student loan cancellation income limit is $250,000. (Each spouse will be eligible for up to $10,000 in student loan cancellation). For Pell Grant recipients, student loan relief of up to $20,000 is available.

The White House says that those income limits are designed to prevent high-income individuals or households (i.e., the top 5% of incomes) from benefiting from the broad student loan relief program.

Normally though, no matter your income level, the IRS treats cancelled and forgiven debt as taxable income. As a result, in the past, you would have to pay taxes on the amount of your debt that was forgiven. But thankfully, for the millions of borrowers who may have a portion (or all) of their student loan cancelled under President Biden’s plan, there are some important exceptions to the normal IRS rule that have applied recently to student loans.

For example, student loan borrowers whose loans are forgiven as part of the Public Service Loan Forgiveness program, are currently exempt from tax on the forgiven amounts. (Eligibility for that program has recently been expanded.)

Also, the American Rescue Plan Act (ARPA), which was enacted during the COVID-19 pandemic, paused taxes on student loan forgiveness from 2021 through 2025. That includes people whose student loans are classified under the Income-Driven Repayment program. ARPA's broad relief covers other repayment programs, effectively making student loan forgiveness nontaxable for most borrowers.

On Wednesday, the White House confirmed that because of the student loan relief provisions in ARPA, the 2022 loan cancellation amounts will be nontaxable for federal income tax purposes. That means that the amount of student loan forgiveness won’t be added to your taxable income—at least through 2025.

The Department of Education will provide more information on the 2022 student loan debt cancellation program in the coming weeks. In the meantime, additional details can be found on the Department of Education’s website.

What about state income tax? It should be noted that most states will follow the Federal government on whether the student loan debt forgiveness is taxable. But stay tuned: there may be some states that consider the loan cancellation amount to be taxable, which could impact your state tax bill.

Student Loan Pause Extension

Although you won’t be taxed on the amount of student loan cancellation you receive under President Biden’s plan, student loan payments are scheduled to resume in January 2023. As you may know, student loan payments were first paused in March 2020 to provide relief at the beginning of the COVID-19 pandemic. That payment pause has been extended numerous times since then—the most recent pause was scheduled to expire on August 31.

So, for the last couple of years, you haven’t been paying interest on your student loans. But in 2023, you’ll likely return to making your normal student loan payments with interest. From a tax perspective, that might not be all bad because of the student loan interest deduction.

When you pay interest on your student loan, the IRS allows you to deduct either the amount of interest you paid during a given tax year, or $2,500, whichever is less. And, you don’t have to itemize your deductions to claim student loan interest because the IRS considers that interest to be an adjustment to your income.

But whether you can claim a deduction for student loan interest depends on several other factors including on your filing status and income.

So, when your student loan payments resume in January, remember that you may be able to get a tax break by deducting any student loan interest that you might pay in 2023. You can learn more about how to claim the student loan interest deduction by visiting the IRS’s website. You can also see Student Loans and Taxes: Basics to Know.

In 2019, Terry Smith, of Jacksonville, Fla., traded in his 2019 Corvette Grand Sport for a same-model-year Chevrolet Silverado pickup. But shortly after he purchased the truck, it started running rough, and certain parts needed immediate replacement. It had transmission, climate control and traction issues, says Smith. He reached out to a friend—a lawyer—who advised him to complain to General Motors before pur­suing legal action (see below for details on lemon laws).

Smith called GM and described the truck’s problems. He told the company that he could pursue legal action but would rather not. GM agreed to take a look at the truck but found that it was operating as designed. Even so, Smith’s lawyer friend advised him to call again and be persistent. After three months of calling and complaining, GM agreed to pay him $5,000.

This past May, after prices for used cars and trucks spiked, Smith decided to sell the Silverado. He had it appraised by CarMax, which offered him $1,000 more than he had initially paid for it. “In the end, I essentially got paid to drive it for a year and a half,” says Smith.

Dealing with a defective product or bad service can be frustrating. But by using time-tested strategies for complaining effectively, you’ll have a good chance of getting satisfaction. Above all, remain calm and be polite—and be prepared to be persistent. Confronting a business can be time-consuming and often takes patience.

Keep your cool

Before you pick up the phone or go online, take some time to prepare your case. And whenever you need to make a complaint, first take your emotions out of the conversation. Essentially, be nice, says customer service consultant Barbara Khozam. That’s because an angry customer may put a customer service rep on the defensive.

The more precisely you can describe the details of your situation, the more likely you are to get results, says Khozam. But while it is important to provide context and give the whole picture, be careful not to overwhelm the company with unnecessary information. “Make sure that when you submit a complaint, you only mention the facts,” says Michaela McDonald, a certified financial planner in New York City. If you purchased a faulty product, take pictures and attach them to an e-mail or social media post. If you’re complaining about a service, it may be worthwhile to review the service description and point out what was left out or altered in your case, says McDonald. You could even copy and paste the service description into your message to the company.

Also, if you have called a company repeatedly about inept service and been ignored, explain how many times you have called and when. If you are a loyal customer, you might also mention how long you have been patronizing the company and what you like about the business.

Aim for the top

In any event, speaking with a human is often your best bet. So if you don’t get results by submitting an online form or using an automated online chat system or an automated attendant via phone, see if you can reach a customer service representative. Sometimes, that’s not easy—phone menus and websites may not provide a way to reach a representative directly—and you may have to look outside of the company’s resources to find out how to get in touch with an actual person.

Doing a little of your own research may go a long way. Try visiting www.gethuman.com, which has phone numbers and shortcuts for how to reach a real person at a number of companies. You can also often find the names and contact information of company CEOs and C-suite employees via LinkedIn or at websites such as www.ceoemail.com.

An owner or manager is more likely to be able to help you than most other company employees, says Khozam. “And if you communicate your situation in a calm and detailed manner, an owner or a manager can likely do something,” she says.

Social media’s role in consumer complaints has grown substantially in recent years. “Reviews on social media can make or break a business,” says Khozam, and a good business with a good owner will be on top of its social media presence. Sometimes a company will even have someone reviewing its social media. But while leaving a review online or commenting on a business’s social media page may be an effective way to get their attention quickly, Khozam recommends using social media as a last resort.

Contacting a consumer agency or government bureau can help. But be sure you understand its role; some organizations mediate between the consumer and the business, while others simply collect complaints to detect patterns. In many cases, the Better Business Bureau (www.bbb.org) will forward your complaint to a company and work with both parties to resolve the problem. For a list of groups that may help you out—as well as sample letters and more tips on effective complaining—go to www.consumer-action.org for a “How to Complain” manual, which is available in three languages.

If your bank or any kind of financial service provider makes a mistake at your expense, you could file a complaint with the Consumer Financial Protection Bureau. The CFPB has processed more than half a million complaints from consumers this past year, says Scott Steckel, stakeholder engagement program manager for consumer response at the CFPB. The most common complaints recently have been issues with credit reporting, debt collection, or checking and savings accounts. But the CFPB sees “the whole waterfall of consumer complaints in consumer financial services,” Steckel says. You can reach out to the CFPB for help regarding transactions with a bank or with a broker, an insurer or any other financial service provider. The agency also deals with problems with car loans and payday loans.

If you have a complaint, file it at the CFPB website (www.consumerfinance.gov) or by phone (855-411-2372) in more than 180 languages. You can also write a letter or send a fax. Ultimately, each complaint is assigned a case number and put into the Consumer Complaint Database, a searchable resource available to the public and updated nightly.

The vast majority of complaints come via the agency website, says Steckel. Identify the product or service, state the issue that you have with it, name the financial company and express your desired resolution, and the CFPB will ensure that the company contacts you within 15 days. You must also certify that your complaint is true and correct, but you don’t have to reach out to the company first. “We say always try to go to the company first, but it’s not required,” says Steckel. “If you have an issue with a financial product or service, then we are here for you,” he says.

Keep expectations in check

Consider some preventive strategies to avoid disappointment. One is the 24-hour rule, says McDonald. If you are thinking about making a major purchase, give yourself at least 24 hours to think it over. If you have time to do research, read consumer reviews and check out a company before you patronize it. The Better Business Bureau’s website has reviews and complaints about member businesses. You can also share your complaint about a company on its public BBB complaints page; many companies will respond and engage with consumers there. Simply search for the company on the BBB website, select its page, scroll to the section labeled “Customer Complaints” and click “File a Complaint” to write a complaint of your own. You’ll also be able to see whether other consumers have had similar issues and how the company responded to those complaints.

Your rights when you buy a lemon

If you recently purchased a new or used car that has not met your expectations, you may have legal options. “Lemon laws,” which protect buyers of so-called lemon cars, vary by state. State lemon laws generally refer to a lemon as a vehicle purchased or leased recently (usually within the past year or two) with defects that the manufacturer or dealer cannot correct within a reasonable amount of time.

All 50 states have some kind of new car lemon law. Under most state laws you are entitled to a full refund for a new car that qualifies as a lemon.

Six states—Hawaii, Massachusetts, Minnesota, New Jersey, New York and Rhode Island—have used car lemon laws as well. The laws have multiple vehicle classifications for coverage, meaning any compensation depends on the age of the vehicle and how many miles it has been driven.

Seven other states have certain protections for used vehicle buyers. Arizona and New Mexico require used car dealers to provide a warranty for a minimum of the first 15 days following the sale or the first 500 miles. Connecticut and Nevada also require some form of warranty, with various limitations. In Maine, a vehicle must first pass a safety inspection. And in Pennsylvania and Illinois, dealers have limitations on the flexibility of the warranty they provide for used cars. A federal law also ensures that manufacturers honor their warranties; if your state’s lemon law doesn’t provide enough protection, then you’re able to pursue relief through the Magnusson-Moss Warranty Act.

You can review detailed information on lemon laws for every state at the Better Business Bureau’s Auto Line (https://bbbprograms.org/programs/all-programs/bbb-autoline/lemon-laws-by-state).

The interest rate for federal direct Stafford loans for undergraduate students will increase to 3.73% on July 1, nearly a percentage point higher than the 2.75% rate for loans issued for the 2020–21 academic year, according to an analysis by Mark Kantrowitz, a student loan expert and author of How to Appeal for More College Financial Aid.

Interest rates on federal student loans are tied to the 10-year Treasury note, which has been inching higher. Rates on federal student loans are still much lower than they were a few years ago.

Rates on new federal loans are set for the life of the loan, so borrowers who took out loans at higher rates can’t refinance to a federal loan at a new, lower rate. Borrowers with good credit may be able to lower payments by refinancing with a private student loan. However, even if that’s an option, you’re better off waiting until after a pause on federal loan payments and interest expires on September 30, Kantrowitz says.

The rate on PLUS loans, which are available to parents and graduate students, is expected to rise, from 5.3% to 6.28%. At that rate, refinancing to a private loan offers even more potential for savings.

But borrowers need to understand the trade-offs, Kantrowitz says. Federal loans offer benefits that private loans lack, such as income-based repayment plans and loan forgiveness. In addition, if President Biden’s proposal to forgive up to $10,000 in student loans is enacted, it would most likely be limited to federal loans.

One of President Biden’s first executive directives after he took office was to extend the pause on federal student loan payments until September 30. The suspension is welcome news to borrowers who are experiencing economic hardships, and in some cases it could reduce the amount they owe.

During the moratorium, borrowers are credited for monthly payments for the purposes of loan forgiveness, even though they’re not making the payments. A borrower who was enrolled in the public service forgiveness program when the first moratorium was announced last March will be credited for 19 of the 120 credits required for loan forgiveness by September, according to Savi, a tech company that helps borrowers manage their student loans.

Similarly, borrowers who are participating in an income-driven repayment plan, which provides loan forgiveness at the end of a 20- to 25-year repayment term, will also get repayment credits during the moratorium, says Mark Kantrowitz, a financial aid expert and author of How to Appeal for More College Financial Aid.

For that reason, it doesn’t make sense for borrowers who are enrolled in one of these programs to make payments during the moratorium, “because that just reduces the amount of loan forgiveness you’re eligible to receive,” Kantrowitz says.

If you’re not eligible for loan forgiveness, making payments during the reprieve will go directly to the loan’s principal, which would reduce the amount you owe when payments resume. But before you tell your lender you want to make payments — which you’ll need to do, since the suspension is automatic — consider whether there are better uses for your money. You should first pay off any high-interest debt, such as credit card debt, and have at least enough in an emergency fund to cover half a year’s living expenses.

At Kiplinger, the name of the game is value. For more than 20 years, our annual college rankings have been no exception. Over the years, we analyzed data on hundreds of public and private colleges and universities across the nation seeking institutions that deliver a high-quality education at an affordable price.

But this year, as the coronavirus forced schools to shutter in mid March and transformed the higher-education system practically overnight, we put our rankings on pause. Instead, we decided to focus on strategies for getting the most value out of a reeling higher-education system, including transfers, gap years and increased financial aid.

For Mika Garcia, a 21-year-old rising senior at the University of West Florida (UWF), the pandemic shutdown meant a softball season cut short. “It was extremely heartbreaking,” she says. “Everything was shut down—no weights, no practice, no games, no visiting one another. It was a weird and confusing and sad time, for sure.”

Samuel Merritt, 20, who was attending the American University of Paris, had to quickly find a flight home. Although he says doing so was “pretty easy,” his father, Dan, recounts the situation differently, noting inflated prices for last-minute tickets to airports near their home in West Caldwell, N.J., and a layover in Düsseldorf, Germany: “I was completely freaked out about his getting home from Paris,” he says. “My biggest concern was that he’d get to Düsseldorf and get stuck there, where he has no place to stay and I don’t know if I’m going to be able to get to him.”

Merritt’s return was safe and smooth, but he’s decided not to return to Paris. “Given the pandemic, I really just want to be closer to everyone.”

This fall, Merritt is set to transfer to Emerson College, in Boston—a move he and his family see as a silver lining to this gray cloud of a year. “I am quite honestly very happy that he’s going to be on soil where I can drive to him,” says his father.

Happily, Garcia’s softball scholarship remains intact—part of the agreement when she signed on with UWF was that her scholarship would carry over all four years of her college career. And certain sports scholarships may remain safe in general.

“For many schools, the athletic program is an important part of their community, enrollment strategy and outreach to their alumni base,” says Kevin Walker, publisher of CollegeFinance.com.

Garcia is looking forward to getting back to school and on the softball field for her senior year, even if classes are conducted online (before the pandemic, she tended to go with online course options to accommodate her rigorous sports schedule) and new restrictions are in place. “As long as we are all staying safe and our health is being taken into account, that’s all that matters,” she says.

Back to school

More than one-third (37%) of high school students report altering their path for higher education, according to a June survey by the College Savings Foundation. Among those who are setting a new course, 40% plan to attend community college to save on costs, and 25% are taking a gap year.

The vast majority (84%) of colleges are planning to reopen for the new academic year with at least some form of in-person classes, according to the Chronicle of Higher Education. But pandemic plans vary greatly, depending in part on each school’s geographic location and campus layout.

The California State University System, the nation’s largest four-year public university system, announced in May that the fall semester would focus on virtual learning, with minimal in-person activity. At the other end of the spectrum, Emerson is planning for a mainly in-person return. The University of West Florida is taking a hybrid approach, allowing students to choose among classes in four categories: full distance learning, primarily distance learning, hybrid (with 50% to 79% of the course delivered remotely) and primarily classroom. Both Emerson and UWF plan to close campus for Thanksgiving and finish the remainder of the term virtually.

With so much variety and uncertainty, the college decision is understandably harder these days. “There has been a lot more hand-wringing and consideration around whether to go to college this fall,” Walker says. “But it might still be the best alternative, even if the mode that college of choice is using is not the optimal one.”

More aid, please

Most schools were quick to issue prorated refunds for room and board, which became unavailable once schools closed in March. But many students and their families think they deserve more. They argue that losing access to in-person classes and on-campus amenities lowers the value of their education—and that change should be reflected in the price. Some families have even filed lawsuits against several schools, including Arizona, Cornell, George Washington, Michigan State and Rutgers universities. Such appeals have so far been unsuccessful, so if schools are forced to close campuses again and shift classes to Zoom, don’t count on reimbursements.

Even if you’ve already settled on a school and been awarded financial aid, you should ask for more, especially if your financial situation has changed due to the pandemic. When you fill out the Free Application for Federal Student Aid (FAFSA), you use financial records from two years prior. Aid awarded for the 2020–21 school year was based on your family’s 2018 tax filing, so the FAFSA may not reflect your 2020 financial needs.

Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com, says the appeal process is pretty straightforward, with schools either providing a standard form or requesting that you write a letter. In the letter, he suggests using bullet points to note each special circumstance—which might include medical issues, job losses, job insecurity and wage cuts—and its financial impact on the family. Attach copies of documentation to support your claims, such as medical bills, layoff notices and bank account statements.

Facts and figures will matter more than your powers of persuasion. “The amount of the adjustment will be based on the financial impact on the family in a very formulaic manner,” Kantrowitz says. But manners count, too. “There is no appeal beyond the financial administrator, so it pays to be polite and to do things the way they expect,” Kantrowitz says. For additional guidance on appealing for more financial aid, see www.kantrowitz.com/books/appeal. Merit-based financial aid is likely to be less generous in order to make more room in the budget for need-based awards.

Take a break

Deferring enrollment or taking a gap year can help alleviate worries about returning to campus amid the pandemic and delay students’ entry into a rickety labor market—all while pausing tuition payments. Still, the move has its obstacles. Understand deferral policies, which vary by school. You especially need to check on whether financial aid that has already been awarded will carry over.

For returning students who already have certain types of student loans, a semester- or year-long break may trigger the repayment grace period. Depending on the type of loan, if a student is no longer enrolled at least half-time, repayments will start coming due in six to nine months. Taking the summer and fall semesters off may count as a six-month grace period—and you only get one. “Once you ultimately graduate, your loans are going to go into repayment immediately,” Kantrowitz says. (If you reenroll before the grace period ends, it resets the clock.)

Structuring a gap year can help make the most of your time away from school and keep you on track to return and graduate on time. But such opportunities may be derailed by the virus.

That’s the issue for Kevin Walker’s middle daughter. She had planned to take a gap year after graduating high school this past spring. But after the virus halted travel opportunities in her intended gap-year program, she changed plans and applied for college in April. As of early July, she was still deciding between two schools, waiting to hear how they would be handling the fall.

Managing the costs

Paying for college—already a challenge for many families—may be increasingly difficult. Nearly 70% of parents with college-bound kids say they are worried about paying for their child’s college education, up from 64% before the pandemic outbreak, according to a survey by Discover Student Loans.

Even before the coronavirus pandemic triggered a sharp spike in the unemployment rate, many families were struggling to pay for college. In the 1979–80 academic year, tuition and fees at a public four-year college averaged $2,600 (in 2019 dollars), according to the College Board. By 2019–20, those costs increased fourfold to $10,440, on average. “College wasn’t affordable to begin with, and there were lots of reasons that was happening,” says Sara Goldrick-Rab, professor of sociology and medicine at Temple University.

One reason she notes is stagnant wages not keeping up with rising costs. The pandemic is making those matters worse. While Black and Latinx workers make up just 11% and 17% of the workforce in the U.S., respectively, they suffered 15% and 24% of recent record job losses, according to the Georgetown University Center on Education and the Workforce.

Students, too, are suffering job in­security, with one-third reporting job losses due to the pandemic, according to a report from the Hope Center for College, Community, and Justice, a research group founded by Goldrick-Rab at Temple University. That has deepened students’ concerns about their ability to afford basic needs, including food and shelter, let alone tuition.

About half of white students report experiencing basic-needs insecurity, compared with 65% of Latinx students and 71% of Black students. (Indigenous students were worst off, with 74% suffering basic-needs insecurity.)

Several schools, including the University of Chicago, Ohio Wesleyan University and William & Mary, have announced tuition freezes, and a handful of colleges are lowering tuition rates: Southern New Hampshire University moved up existing plans to cut tuition by 61%, to $10,000 a year. Williams College is cutting tuition rates by 15%.

But other colleges are forging ahead with rate increases. For example, at New York University, full-time tuition (for 12 to 18 credits) for undergrads at the College of Arts and Science rose about 3%, from $25,342 in fall 2019 to $26,102 this fall.

Despite the financial challenges college poses, the pandemic has emphasized the advantages of having a college education. Workers with a bachelor’s degree or higher account for only 19% of recent job losses, according to the Georgetown Center on Education and the Workforce. By comparison, workers with a high school diploma or less suffered 46% of job losses. Also, white-collar workers are more likely to have the option of working from home, a privilege that has allowed them to continue earning the same income while sheltering in place.

To ensure your family can afford college, whether your prospective student is in diapers or donning a cap and gown, you need to get your financial plan in order. “The sooner families start planning, the better,” says Derenda King, a certified financial planner in El Segundo, Calif.

“What is often misunderstood is that paying for college is not just about saving,” King says. “To save on college costs, families need an integrated and strategic approach that entails having a proper understanding of how the financial-aid process, savings and investments, tax strategies, borrowing, and loan-repayment options all work together to lower the cost of college.”

Still, saving is important—and you may need to do more of it. Kantrowitz expects tuition rates at public colleges to rise faster than usual in a couple of years. As state and federal budgets suffer, public colleges can expect to see less funding, which may lead to higher costs and less financial aid.

In the short term, though, families have some bargaining power to score big discounts and additional aid. “Schools don’t want to lose students in terms of enrollment,” Walker says. “Every incremental dollar that comes in is important to them, so they’re going to be very motivated to work with the family.”

How much a school is able to give depends on its own financial security, an important point to consider if you’re still undecided on where to enroll or willing to transfer. Check into prospective schools’ endowment funds, enrollment levels (years of declining enrollment is a “leading indicator of a deep financial problem,” Walker says) and discount rate (the average share of tuition and fees that a school covers with aid and grants).

“Knowing which schools have a great track record of meeting a family’s demonstrated financial need or which schools provide generous merit aid can help inform your funding strategy,” King says. A good place to start is Kiplinger’s best-value college rankings for 2019.

5 ways college is changing

1. Lower enrollment. As families struggle through the pandemic recession, fewer students are likely to be able to afford the high cost of college. About half of college presidents expect fall enrollment to be lower in 2020 compared with 2019, according to a June survey by the American Council on Education. (Optimistic note: That’s down from 62% in May.)

However, past economic downturns have typically seen an increase in college enrollment. Following past patterns, Moody’s Investor Service estimates that higher education enrollment could actually rise 2% to 4% for the fall, according to a June report.

Either way, enrollment levels are at risk among international students, who tend to pay full price, making them more-lucrative enrollees. While the Trump administration rescinded plans to strip visas from international students if their schools went entirely online, travel restrictions could still deter some from attending school in the U.S. The Trump administration’s suspension of work visas for foreigners is also expected to shrink this cohort of students.

2. Tighter budgets. Revenue per student is expected to drop by 5% to 13%, according to Moody’s. Market turmoil is threatening endowment funds. Federal and state funding is likely to be cut, as government budgets get squeezed themselves. All that means tighter budgets, so schools will have to cut spending, delay campus construction, freeze salaries and lay off staff. Ultimately, fewer schools will remain. Kevin Walker, publisher of CollegeFinance.com, estimates that 100 to 200 schools may close or merge within the next three years. “Many of them will close because they were barely making it prior to the coronavirus crisis,” he says. “[This] just pushed them over the edge when it came to their ability to bring in the tuition dollars and the enrollment they need to keep their business model working.”

3. More education technology. Look for an explosion of online learning options to generate new revenue. Traditional schools still lag leading online educators, such as for-profit colleges. That spells more sales to colleges by leading software vendors, such as Blackboard, Canvas and Moodle.

Innovation in education technology will accelerate. Look for more virtual experiences that feel like a real classroom, as well as artificial intelligence tools to automate grading.

4. Smaller staffs. In an effort to balance budgets bleeding red ink, 224 colleges and universities had laid off, furloughed or opted to not renew contracts for nearly 51,800 employees as of July, according to the Chronicle of Higher Education. Cuts included professors from programs that have shrunk or been shuttered; all types of administrative positions; dining and other service staff; and sports coaches and assistants. The fallout could lead to worse student-faculty ratios and fewer student activities, among other things.

5. No parties? To update policies and procedures in accordance with coronavirus restrictions, schools are cobbling together solutions, from COVID quarantine dorms to Plexiglas-divided lecture halls. And whether mandated or recommended, social-distancing etiquette—wearing a mask, staying 6 feet apart and limiting gatherings, especially indoors—is certain to change the college experience. “It’s not going to be back to normal until there is a safe and effective vaccine,” says Savingforcollege.com's Kantrowitz.

The case for community college

Enrolling in your local community college can be a great way to pursue an affordable education while minimizing the risk of coronavirus exposure and spread. “It’s not just a smart financial move; it is a smart move,” says Sara Goldrick-Rab, professor of sociology and medicine at Temple University. “Community college is great, and it always has been,” she says. “All the community colleges have needed is for the public to start acting like it.”

If you plan to transfer your credits to a four-year college later, though, note a potential drawback to this strategy: Transfer students tend to get less financial aid than first-year students, so you have to plan accordingly. “It can mean several thousand dollars less in grants,” says Savingforcollege.com's Kantrowitz.

Question: I heard that the new tax law changed the amount of time I have after leaving my job to pay back a 401(k) loan. What are the rules now for borrowing from your 401(k)?

Answer: The new tax law changed the deadline for repayment after you leave your job starting in 2018. In the past, you generally had only 60 days to repay the loan or else you’d have to pay income taxes on the money as if it was a withdrawal (and a 10% early-withdrawal penalty if you left your job before age 55).

But under the Tax Cuts and Jobs Act, you don’t have to pay taxes or the penalty if you repay the loan by the due date of your tax return for the year when you leave your job (including extensions). For example, if you leave your job in 2019, you’d have until April 15, 2020, to repay the loan (or October 15, 2020, if you file an extension). However, taking advantage of this extended time frame to repay could lead to complications if you’d like to roll over your 401(k) balance to a new employer’s plan, says Michael Weddell, director of retirement at benefits consultant Willis Towers Watson.

You can generally borrow up to half of your 401(k) balance, but no more than $50,000. Most plans charge the prime rate plus 1 percentage point for the loan, which as of mid February would add up to 6.50%. You generally have five years to pay back the loan while you’re still working for that employer or longer if the 401(k) loan is to buy your primary residence. Most plans give employees 10 to 15 years to repay a loan for a primary residence, although some plans have deadlines as short as five years or as long as 30 years, says Weddell.

If you do take a 401(k) loan, try to keep contributing to your 401(k) while you’re paying back the loan so you can continue to receive any employer match and to minimize the hit to your long-term savings. You borrow your own money and pay the interest back into your account. But you will lose the opportunity for investment gains on the borrowed money while it’s out of the account. Just because you had to take a loan, Weddell says, is no reason to give up on saving for retirement and earning an employer match.