Federal income-driven student loan plans have debt forgiveness provisions after specified repayment periods. For example, if you have a Revised Pay As You Earn (REPAYE) loan, your remaining debt will be forgiven after 20 years if the loan was for undergraduate study or after 25 years for graduate-level study.
REPAYE loans are being replaced with a new program called the Saving on a Valuable Education (SAVE) Plan. If you're single and have an adjusted gross income of $32,800 or less, you won't have to repay your federal student loans. The threshold increases to $44,370 if there are two people in your household. Note, though, that the amounts are higher in Alaska and Hawaii.
Even if you make more than these thresholds, you could still save money. The Office of Federal Student Aid estimates that borrowers with greater earnings will still pay at least $1,000 per year less on student loans than they would with current income-driven repayment plans.
It's possible that other student loan plans could be available in the future. Make sure you check out all of your alternatives.
2. Explore refinancing or loan consolidation
The SAVE Plan only applies to federal student loans and not private student loans. If you're retired and have a private student loan, explore the possibility of refinancing your loan to obtain a lower interest rate.
If you have multiple loans that include at least one student loan, you can also look into the possibility of consolidating your loans. Keep in mind, though, that loan consolidation can sometimes make paying off your loan take longer.
3. Set a budget and stick to it
Once you've taken the first two steps, you should know exactly how much you'll owe each month on your student loans. Create a monthly budget that includes your student loans as well as all of your other expenses. Prioritize repayment of your student debt ahead of non-essential expenses such as eating out. After you've set your budget, stick to it.
