NerdWallet's Smart Money Podcast - Money News: What to Know About Student Loan Repayments, Gas Prices, SkyMiles and Other Financial News Stories

Episode Date: October 4, 2023

Learn about federal student loan payments resuming, alongside an analysis of this week’s biggest financial stories. Before discussing this week’s resumption of federal student loan payments after a three-and-a-half-year pause due to the pandemic, hosts Sean Pyles and Anna Helhoski break down this week’s most relevant financial headlines. The discuss the recently averted government shutdown, the impact of crude oil costs on gas prices, an update on Delta’s SkyMiles program, and a new Pew Research Center survey looking at the share of women in top leadership positions at US companies. Turning their attention to student loan payments, Sean and Anna guide listeners on ways to prepare for this financial milestone, emphasizing the importance of staying informed, making payments if possible, and exploring income-driven repayment plans like the new "Saving on a Valuable Education" (SAVE) plan. In their conversation, the Nerds discuss: financial headlines, federal student payments, income-driven repayment (IDR) plans, Saving on a Valuable Education (SAVE), averting a government shutdown, oil prices, Delta Airlines’ SkyMiles frequent flyer program, a new Pew Research Center survey on women in leadership, business leaders, loan servicers, the Fresh Start program, interest accrual, and personal finance. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Holoski. And this is our weekly personal finance news roundup, where we take a look at recent developments in the world of money, and then go in-depth on an issue that's important to your life and your bottom line. So Anna, we've been talking about it for weeks. Months, even years, really. Can our listeners guess what that might be? I'm willing to bet they can. Yeah, it's time, people. Time to start paying your federal student

loans again. And if you've forgotten how, after a three and a half year moratorium, we're going to walk you through the processes and everything else you need to know. But first, a few money headlines. So, Anna, no government shutdown. Yeah, at least for about six weeks. Okay, so all that advice we gave before last week's deadline about socking away money and making sure you can withstand financial effects of a shutdown. You have six more weeks to get it done because we live in a political goldfish bowl and we're probably going to be right back in the same place in mid-November. Well, that's good news for procrastinators. Yes. You know where else we're headed, Sean?

Where? $100 a barrel oil. Ouch. Yeah. Brent crude is up about 30% from June, hitting a one-year high last week of $96 a barrel. Fortunately, some analysts believe it's not going to stay that high for the long run, but it could raise prices at the pump again. Yeah, I know I'm feeling that at the pump. In my area, gas for my car is getting frighteningly close to $6 a gallon. But just to back up a little, Anna, would you care to explain just what Brent crude is?

Of course. It's one of the benchmark oil prices used by energy traders. There are different kinds of oil. Brent crude is pulled mostly from the North Sea, and its consistency or viscosity makes it easy to turn into gas and diesel fuel. There are two other major benchmarks, West Texas Intermediate, or WTI, and Dubai Oman. But you will almost always hear about Brent crude as the major oil price marker. About two-thirds of the world's oil supply is priced off of Brent crude futures. Well, I feel smarter than I did two minutes ago. You're welcome. Here's a lesson. Sometimes consumers do have power.

And what's today's proof? Well, listeners may remember our headline item from a few weeks ago about changes to Delta Airlines' frequent flyer program called SkyMiles. Yes, Delta's frequent flyers were none too pleased with those changes. Indeed, they were not. So Delta has cried uncle and says it's going to revisit those modifications to mollify MIFT members. I see what you did there. Merci. Yeah, sometimes if you complain enough and if enough people do the complaining, you can change stuff that you don't like.

So is there any word on what changes might be coming to those previous changes? Not yet. Stay near the gate for the boarding announcement. And our final headline today, Sean, is about the obstacles women face in becoming business leaders in America. Oh, nice. I'm guessing these obstacles have something to do with double standards and plain old sexism? Pretty much. A new Pew Research Center survey looks at the share of women in top leadership positions at U.S. companies. Here are a few findings. 58% say a big reason there aren't more women at the top is because they have to do more to prove themselves than their male counterparts do. 55% say there are too few women in those top executive positions, and almost 80%

of those say there should be an equal number of men and women in those roles. But perhaps most disheartening is the divide between men and women on why all of this is happening. 65% of women say there aren't enough of them at the top of the corporate food chain, but only 45% of men say that. And almost 60% of women say there is gender discrimination for women in business, but only 39 percent of men say that. We've come a long way, but still a long ways to go. Yeah. Or maybe we haven't come that far, actually. One wonders. OK, that's what we saw and heard about over the past week in Money News. Let us know what we missed and send us the headlines you've seen and want to hear more about. Oh, wait, Sean, one more headline. Yes. The Powerball lottery is still going. Nobody won last week. It's because

I forgot to play. Oh, naturally. And nobody won on Monday night. So the new estimated payout will be $1.2 billion. That's billions with a B. Third largest jackpot ever. Sean, even I might have to go spend those $2 for a ticket. Yeah, I'm going to go run out to the corner store in a little bit. But first, on to our in-depth look at federal student loan payments restarting after a three and a half year pandemic-induced hiatus. Sean, when was the last time you made a student loan payment? You know, I actually made one a few weeks ago, but before that, my last payment was

in February 2020, which frankly feels like a lifetime ago. An eternity, considering how much has happened in those three and a half years. To recap, since federal student loan payments were paused in March 2020, we had a whole pandemic, Tiger King, a presidential election, the Wordle sensation, an inflation surge, and Taylor Swift's transformation from pop star to godlike figure capable of instigating mass celebrity worship syndrome, and multiple student loan forgiveness disappointments. But it's October, and that means the time has finally come for payments to restart. Yep, the first bills are due this week.

So let's get down to the nitty gritty. You may have gotten your bill already, or you may be waiting for yours to arrive. Either way, you should receive a notice from your servicer letting you know when you have to start paying again. On my end, I received an email from my servicer last week with info about my payment and due date. And interestingly, my payment due date is the same day of the month as it was before the pause, even though my servicer changed.

Weird. So that's a fun little detail. Anyway, if you didn't get that info or you're not even sure who your student loan servicer is, you can still log in at studentaid.gov with your federal student aid ID to find out. So once you do know who your servicer is, you can log into their website and do things like re-enroll and auto pay or update any contact information if it's changed in the last three and a half years. Like your address. I know my address changed twice in the last three and a half years. Yep. I had to update my address too. I mean, it's really jarring that so much has changed in our lives over the past few years, but our student loans were essentially in a time capsule just waiting for us to repay them.

Well, beyond updating your information, Anna, what else should folks know about making their payments? So there are a couple of important things to know about the first bill you receive. You'll see your previous loan balance minus any cancellation you qualified for during the pause. That could be public service loan forgiveness or any number of other programs. And if you were one of the borrowers who requested a refund on payments you made since March 2020, that amount has been added back into your balance. Finally, the amount that's due will automatically be what you'll pay on a standard 10-year repayment plan, unless, of course, you choose a different plan. Like standard 10-year repayment plan, unless of course you choose a different plan. Like an income-driven repayment plan? Yes, income-driven repayment or IDR.

Those plans will set your payment at a portion of your income and then forgive the remaining balance typically after 20 or 25 years. Yes, though notably most people will repay the total amount they owe before that forgiveness kicks in, unless your income stays low the entire time you're paying off the debt. There are a few different IDR plans to choose from, but the new one to be aware of is called saving on a valuable education or save. Here are some things to know about save. First, there's no income limit. So no matter what you earn, you qualify. Interest also won't grow on your balance as long as you pay your bill. That's to prevent you earn, you qualify. Interest also won't grow on your balance as long as you pay your bill. That's to prevent you from paying interest on your interest. Your payment is $0 if you earn less than $32,800 as an individual or less than $67,500 for a family of four.

And for now, payments on undergrad loans will be at least 10% of your discretionary income. Later on, that will be lowered to 5%. That's right. Some of the most important features of a save won't actually kick in until July 2024, like those payments capped at 5% of your discretionary income. Most borrowers, those with undergraduate debt, should see their payments cut in half once this happens. There is also going to be a shorter

timeline until you're eligible for forgiveness. So for instance, if you borrowed $12,000 or less, you'll see your remaining balance forgiven after 10 years of payments instead of 20 or 25 years. If you want to enroll and save, you're going to need to contact your servicer. Ana, it's been a long time since payments have been due, and I've seen some talk online about a debt strike where folks will just refuse to pay their bills. What if borrowers decide to give the metaphorical bird to their loans and they just don't pay? It's tricky. I would say if you can pay your bills, doing so is a smart idea because you don't want to fall behind. But there is a 12-month on ramp where late or missed payments won't be reported to credit bureaus. So that means credit

scores won't drop and you won't default on your debt. So you technically won't be penalized if you don't make payments during that 12-month period. Okay, but interest will still accrue on your loan, right? Yes, it will accrue, but unpaid interest won't capitalize or be added to your principal loan balance after the on-ramp expires. That means you won't be paying interest on your interest in the future. But I will note, there are some drawbacks if you decide not to pay or you can't pay. For instance, you'll still have to pay any missed payments once the on-ramp expires on September 30th, 2024. You'll also have to pay more in interest because, as I said, it's still accruing. And finally, you won't be making any

progress toward forgiveness under existing plans like public service loan forgiveness. So more or less, people can treat it like a safety net. Exactly. There are a couple other details that borrowers should know about now that payments have resumed. First off, if your federal student loans were in default prior to the pause, you need to sign up for something called the Fresh Start Program. That will put your loans back into good standing. To sign up, log into your account at myeddebt.ed.gov. That's M-Y-E-D-D-E-B-T dot E-D dot G-O-V. Just rolls off the tongue, doesn't it, Sean? It really does, yes.

There's also an account adjustment in place that will move most borrowers closer to forgiveness through income-driven repayment or public service loan forgiveness. That adjustment is automatic and will be done in different ways. So the first forgiveness was delivered in August and there was another one last week. About 800,000 federal student loan borrowers had their loans erased as part of the income-driven repayment adjustment, while millions of others are expected to benefit from the program next year. And as we mentioned, IDR forgiveness happens after 20 or 25 years, depending on your loan. So this automatic adjustment could bring you closer to forgiveness.

One last thing, because it bears reminding, the U.S. Supreme Court struck down the Biden administration's plan to cancel up to $20,000 in student debt per borrower. So that particular option is over. The Biden administration technically has a plan B in the works, but don't count on it. Yeah, don't count on that. So we threw a lot of information at listeners, but I think there are three overall messages here that I'm hoping student loan borrowers will take away. The first is pay your bills if you can. The second, don't count on student debt cancellation outside the existing forgiveness programs. And finally, if you're having trouble making payments, contact your student loan servicer.

We've got more details about the Save IDR plan at nerdwallet.com. There's also a checklist of what you need when payments restart. All right, before we wrap up, listener, I've got a favor to ask. We are putting together a special end-of-year episode, and I want to hear about the best thing that happened to you financially during 2023. Maybe you bought a house or got out of debt or just learned a lot about personal finance by listening to Smart Money. Leave a voicemail or text me on the Nerd Hotline at 901-730-6373. That's 901-730-NERD.

Or send us a voice memo at podcast at nerdwallet.com. That's it for this week's funny news. Today's episode was produced by Tess Bigland and edited by Rick Vanderkenyte. Kevin Tidmarsh mixed our audio. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.