The ongoing Hollywood strikes have left many workers grappling with financial instability, with a sharp drop in income sparking concerns over looming student loan payments. However, this crisis could also present an opportunity for those affected, as loan advocates suggest that workers can significantly cut their monthly payments, particularly for federal student loans. The Education Department’s optional repayment plans, including a new one recently introduced by the Biden administration, could be a lifeline for those struggling on the picket lines and for below-the-line workers sidelined by the walkouts.

The crux of the matter is that any worker affected by a strike can reduce or even eliminate their monthly payments while work is scarce. Acting promptly can ensure these changes take effect before the next payment is due in October. These options are particularly beneficial to workers in standard student loan repayment plans, which, much like a mortgage, require fixed monthly payments high enough to pay off the borrowed amount plus interest in 10 years (or 25 years with extended plans). For these workers, a sudden dip in income can be financially crippling, but the Education Department’s four "income-driven repayment" plans could offer a much-needed reprieve.

Hollywood Strike Workers Get Relief for Student Loan Payments

Workers in Hollywood and Southern California hotels, who are currently on strike, are facing a new challenge in the form of looming student loan payments. However, advocates for borrowers have highlighted that this could actually be an opportunity to reduce monthly payments, particularly for federal student loans.

A Chance to Recalibrate Payments

The Education Department offers optional repayment plans that could ease the burden on workers affected by the strike. These plans could potentially reduce or even eliminate monthly payments while work is scarce. The key is to act promptly so that changes can be implemented before the next payment due date in October.

Income Driven Repayment Plans

Standard student loan repayment plans function like a mortgage with fixed monthly payments. When income drops, as it has for the striking workers, these payments can become burdensome. The Education Department offers four income-driven repayment plans which calculate payments based on income rather than the total amount owed. Natalia Abrams, president of the nonprofit Student Debt Crisis Center, advises that this is the perfect time for affected workers to recertify their income and adjust their payments.

New SAVE Plan

The Biden Administration has recently rolled out the Saving On a Valuable Education (SAVE) plan. Under this plan, the monthly payment will be 10% of the income over 225% of the federal poverty level. A single, unmarried striking worker with no other sources of income would be eligible for a $0 payment under any Income-Driven Repayment (IDR) plan. The Biden administration estimates that more than 1 million borrowers fall into this category.

Proving Income Drop and Plan Tradeoffs

To prove an income drop, one can submit a signed statement declaring their estimated yearly gross income. There’s no obligation to update the department or loan servicing company when income increases until it’s time to recertify income and family status annually. However, switching to an income-driven plan means payments could extend up to 20 or 25 years depending on the loan size and type. Any remaining balance after the required number of payments will be canceled.

How to Sign Up

Interested borrowers can apply for an income-driven plan by filling out a virtual application at studentaid.gov/idr/. It’s crucial to recertify income every 12 months to avoid being put back into a standard plan.

Conclusion

While the strike has undoubtedly put financial pressure on workers, this situation presents an opportunity to reassess student loan repayments. The new SAVE plan and other income-driven repayment plans can provide temporary relief to those affected. However, borrowers need to be aware of potential long-term implications, including extended repayment periods and potential tax implications on forgiven debt.