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This lesser-known first-time penalty abatement may waive IRS fees in certain situations, tax pros say.
“It’s like a get out of jail free card,” said Rosemary Sereti, managing director of Deloitte Tax.
However, there are specific IRS guidelines to qualify for penalty relief.

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LAS VEGAS — If you received a tax penalty notice from the IRS, it’s possible to get the fees waived in certain situations, tax experts say.
The lesser-known first-time penalty abatement provides relief for otherwise compliant taxpayers.

“It’s like a get out of jail free card,” said Rosemary Sereti, managing director of Deloitte Tax and former IRS senior executive. 
But “not every taxpayer qualifies,” she said, speaking at the American Institute of Certified Public Accountants’ annual conference, held in Las Vegas.
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Some of the common individual tax penalties may include failure to file, which is 5% of unpaid taxes per month (or a portion of the month) your return is late, up to 25%, or failure to pay for 0.5% monthly, capped at the same percentage. 
“Very frequently, these two penalties run together,” said Debra Estrem, managing director of private wealth controversy at Deloitte Tax, who also worked at IRS Counsel.

Another fee, the accuracy-related penalty, is typically assessed at 20% of the underpayment amount for cases of “negligence or disregard,” according to the IRS. In some cases, the fee can rise to 40%, Estrem said.
There’s also a high fee for civil fraud — “a whopping 75% penalty” — but the IRS has the “burden of proof” for those cases, she said.

How to qualify for IRS penalty relief

Three penalties may qualify for first-time abatement: failure to file, failure to pay and failure to deposit, according to the IRS. However, most taxpayers won’t qualify if they didn’t file a return, Sereti said.
The IRS also expects a history of tax compliance, including on-time filings, payments and no penalties. “You have to be a good taxpayer that made a one-time mistake,” she said, noting that you need a “clean record” for the past three years. You can see detailed IRS rules here.

When you receive an IRS penalty notice, you can request a first-time abatement by following the letter’s instructions.
The fastest option is typically calling the phone number in the right corner of the notice to speak with the IRS. There’s also the option to send a written request by mail.
If approved, you’ll receive another notice with the penalty and interest removed. But if the IRS doesn’t grant your request, you can try to appeal the decision. More

The justices should make their ruling on Biden’s student loan forgiveness plan before their term ends for summer recess.
Here’s what’s at stake with the decision.

The U.S. Supreme Court.
Douglas Rissing | Istock | Getty Images

Justices to consider if president can cancel debt

At an estimated cost of about $400 billion, Biden’s plan to forgive student debt is one of the most expensive executive actions in history.

The justices are likely examining whether or not the president has the power to implement such a sweeping policy.

The Biden administration insists that it’s acting within the law, pointing out that the Heroes Act of 2003 grants the U.S. secretary of Education the authority to make changes related to student loans during national emergencies. The country had been operating under an emergency declaration due to Covid-19 when the president rolled out his plan.
Opponents of the debt jubilee say the administration is incorrectly using the law, which was passed after the Sept. 11 terrorist attacks.
“It is not an across-the-board, get-out-of-debt provision that an administration can invoke at will,” the six Republican-led states note in their lawsuit against the plan. “It is not an across-the-board, get-out-of-debt provision that an administration can invoke at will,” the six Republican-led states who brought one of the lawsuits note against the plan.

Legal experts say forgiveness plan faces tough odds

Gregory Caldeira, a political science professor at Ohio State University, told CNBC before the oral arguments that he wouldn’t be surprised if the highest court rules against Biden.
“The court’s conservatives have been very aggressive in striking down the decisions of Congress and the president,” Caldeira said.
For a number of reasons, Dan Urman, a law professor at Northeastern University, also predicts that student loan forgiveness won’t survive the Supreme Court.
In an earlier interview, he said that the conservative justices believe government agencies exert too much authority and “violate the separation of powers.” In addition, he said, the concept of loan forgiveness seems to run counter to their notions of individual responsibility.

Striking down forgiveness will add to growing skepticism that the conservative justices vote for conservatives, and the liberal justices vote for liberals.

law professor at Northeastern University

Such a politically fueled decision, however, is likely to further damage the public’s perception of the judicial branch, Urman said.
“Striking down forgiveness will add to growing skepticism that the conservative justices vote for conservatives, and the liberal justices vote for liberals,” Urman said.
Just 25% of Americans have confidence in the Supreme Court, a Gallup poll found last summer.
Still, the justices can issue surprising decisions and legal experts said Solicitor General Elizabeth Prelogar, the lawyer who argued on behalf of the Biden administration and its student loan forgiveness plan during oral arguments, did an exceptionally good job.

Fordham law professor Jed Shugerman had tweeted after the February arguments that he was “struck by SG Elizabeth Prelogar’s brilliant performance.”
“She may have snatched victory from the jaws of defeat,” Shugerman wrote.

What’s at stake for borrowers

The outcome of the justices’ decision could have dire consequences for families, Thomas Gokey, co-founder of the Debt Collective, a national union of debtors, said in a previous interview.
“For many people, this is life and death,” Gokey said. “What’s at stake is being forced to choose between paying for student loans or being able to buy groceries, make rent and pay medical bills.”
If every eligible borrower applies for the relief, Biden’s student loan forgiveness plan is estimated to wipe out $400 billion in federal student debt, according to the Congressional Budget Office. That would reduce the country’s $1.7 trillion outstanding education debt balance to $1.3 trillion.
Roughly a third of those with federal student loans, or 14 million people, would have their balances entirely forgiven by the president’s program, according to an estimate by Kantrowitz.
Around 37 million people would be eligible for some loan cancellation, Kantrowitz estimates — up to $20,000 if they received a Pell Grant in college, a type of aid for low-income families, or as much as $10,000 if they did not. More

There are more opportunities to tip for a wider range of services than ever before.
Between the high cost of living and uncertain economy, cash-strapped consumers are starting to tip less.
Two-thirds of Americans have a negative view about tipping, according to Bankrate, particularly when it comes to contactless and digital payment prompts with pre-determined options.

From self-service fast-food restaurant kiosks to smartphone delivery apps, there are more opportunities to tip for a wider range of services than ever before.
But between the high cost of living and uncertain economy, cash-strapped consumers are starting to tip less — and resent tipping prompts even more.

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Fewer consumers now say they “always” tip when dining out compared with last year, according to a new report by Bankrate, or for other services, such as ride-shares, haircuts, food delivery, housekeeping and home repairs. 
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“Inflation and general economic unease seem to be making Americans stingier with their tipping habits, yet we’re confronted with more invitations to tip than ever,” said Ted Rossman, Bankrate’s senior industry analyst.
Many feel the pressure to tip has increased over the last year, NerdWallet’s consumer budgeting report also found.
However, two-thirds of Americans have a negative view about tipping, according to Bankrate, particularly when it comes to contactless and digital payment prompts with pre-determined options that can range between 15% and 35% for each transaction.

“Now you have to go out of your way to not tip and that’s what a lot of people resent,” Rossman said.
Tipping 20% at a sit-down restaurant is still the standard, etiquette experts say. But there’s less consensus about gratuity for a carryout coffee or other transactions that didn’t involve a tip at all in the past.
While tipping at full-service restaurants has held steady, tips at quick-service restaurants by guests fell to a five-year low of 16.7% in the first quarter of 2023, according to Toast’s most recent restaurant trends report.

Americans have ‘tip fatigue,’ resent ‘tip creep’

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“Part of it is tip fatigue,” said Eric Plam, founder and CEO of San Francisco-based startup Uptip, which aims to facilitate cashless tipping. 
“During Covid, everyone was shell shocked and feeling generous,” Plam said.
“The problem is that it reached a new standard that we all couldn’t really live with,” he added, particularly when it comes to tipping prompts at a wider range of establishments, a trend also referred to as “tip creep.”
“Now we are inventing new scenarios where tipping should occur.”

Some workers rely on tips, some don’t

Yet, since transactions are increasingly cashless, having a method to tip workers in the service industry earning minimum or less than minimum wage is critical, Plam added.
In fact, the average wage for fast-food and counter workers is $14.34 an hour for full-time staff and $12.14 for part-time employees, including tips, according to the most recent data from the U.S. Bureau of Labor Statistics.
“People should know that the livelihood of that person is largely based on how much tipping happens,” Plam said.

In other cases where workers don’t rely on gratuity for income, “we, as consumers, should use our own judgment.”
That doesn’t mean consumers need to necessarily tip less, Plam added, but “think about whether that person improved your experience.”
“It’s time to take a stand,” he said.
Subscribe to CNBC on YouTube. More

Despite improvements, the IRS still has a sizeable backlog of returns, according to the National Taxpayer Advocate Erin Collins.
After focusing on phone service, the agency is juggling millions of amended returns, filings in suspense and other correspondence.
Given these challenges, Collins has concerns about the timing of the IRS’ plans for testing a direct filing system.

Erin M. Collins, National Taxpayer Advocate
Source: IRS

LAS VEGAS — After a difficult three years for taxpayers, the IRS has made significant improvements. But there’s still work to do, according to the National Taxpayer Advocate Erin Collins.
“This filing season has probably been as close to normal as possible,” she said, speaking at the American Institute of Certified Public Accountants’ annual conference in Las Vegas this week.

However, despite customer service boosts, the agency is still working through a sizable backlog — including amended returns, filings in suspense and other correspondence, she said.
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Collins said the IRS is currently juggling 3.7 million amended returns, 6.8 million “in suspense” with missing information and 5.3 million pieces of correspondence. “Those are pretty big numbers that the IRS is still dealing with,” she said.
This season, the agency has prioritized phone service and answered more than 85% of calls from key phone lines in less than five minutes.
“But it did come at a cost,” Collins said, because phone assistors process paper returns during downtime from answering calls. “The problem is, we are now back to a backlog of paper correspondence and amended returns, similar to where we were a year ago,” she said.

Concerns about direct filing system testing

Collins also expressed concerns about the agency’s plans for new programs amid the current backlog.
In May, the IRS announced testing for a free online direct filing system, with a pilot program launching for some taxpayers during the 2024 filing season.
Nearly three-quarters of taxpayers expressed interest in a free IRS-provided filing system, according to a 2022 survey cited in the agency’s feasibility report.

We cannot go into the next filing season with another backlog.

Erin Collins
National Taxpayer Advocate

While Collins believes the IRS has the technical capability to implement direct filing, she worries about the timing. “IRS still is not out of the hole that they have dug,” she told CNBC.
“We cannot go into the next filing season with another backlog,” she said. “We need to eliminate that word from the IRS’ vocabulary.
“No more backlogs,” she added.
Collins also pointed to state tax challenges, especially for more than 40 states that rely on federal returns for residents’ state filings. If you decouple those returns, it could cause issues for state tax administration, she said. More

FA Playbook

This spring, affluent Americans felt relatively pessimistic about the economy, with several perceived threats to personal wealth, according to CNBC’s May 2023 millionaire survey.
Respondents said the top three threats to personal wealth were the stock market, inflation and U.S. government dysfunction.
Financial advisors cover the best ways to protect personal wealth from these risks.

Getty Images

Investors should ‘stick to their long-term plan’

With the debt ceiling crisis in the rearview mirror, investors are shifting their focus to other economic concerns, experts say.

“We’re starting to climb that wall of worry again,” said certified financial planner Chris Mellone, partner at VLP Financial Advisors in Vienna, Virginia, referring to market resilience despite economic uncertainty.
While some clients are hesitant to put money to work amid recession fears, he urges investors to “stick to their long-term plan,” rather than keeping cash on the sidelines, he said.
The volatility index, or the VIX, is currently trending lower, below 15 as of June 5, Mellone pointed out. “It looks like if we do have a recession, it’s going to be shallow,” he said.

Inflation is still a top concern

While inflation continues to moderate, many affluent Americans still worry about high prices.
“That’s the thing I hear the most from my clients,” said Natalie Pine, a CFP and managing partner at Briaud Financial Advisors in College Station, Texas, noting that inflation is a big concern for her clients with assets of $1 million to $5 million.
Annual inflation rose 4.9% in April, down slightly from 5% in March, the U.S. Bureau of Labor Statistics reported in May.

We’re starting to climb that wall of worry again.

Chris Mellone
Partner at VLP Financial Advisors

A significant number of millionaires, especially older investors, believe it will take one to five years for inflation to fall to the Fed’s target of 2%, the CNBC survey found. Meanwhile, some 43% of millionaires are weighing portfolio changes or plan to make adjustments due to inflation.
Matthew McKay, a CFP who also works for Briaud Financial Advisors, said investing to “keep pace with and beat inflation” is the best way to combat sticky high prices.
“We’re seeing a lot more interest in alternative assets and private deals, which can generate returns,” he said. “We do a lot in the oil and gas space, which is a big driver of inflation, so that’s a good hedge there.” More

As the 2024 presidential race for the White House heats up, candidates’ plans for Social Security are emerging.
While top contenders have vowed to protect benefits, experts say reforms to the program are needed “sooner rather than later.”
That may require bipartisan compromises on benefits and taxes, or even possibly creating a more “modern” version of Social Security, as one hopeful is proposing.

zimmytws | iStock | Getty Images

Last November’s midterm elections were expected to bring a so-called “red wave” of wins for Republican candidates. But ultimately, voters gave Democrats an edge in some of the most competitive congressional districts.
One deciding factor was candidates’ messages around Social Security and Medicare, which helped sway voters, particularly those ages 50 and up, according to an analysis from AARP following the Nov. 8 election.

Now, as the 2024 presidential election approaches, and GOP hopefuls line up for their party’s nomination, they face new pressure to decide where they stand, particularly with Social Security.
Former President Donald Trump and Florida Gov. Ron DeSantis — who thus far are in the lead in the Republican polls — have so far pledged not to touch the program.
“Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security to help pay for Joe Biden’s reckless spending spree,” Trump said in January.
In March, DeSantis told Fox News, “We’re not going to mess with Social Security as Republicans.”
Their position matches that of President Joe Biden, who during the State of the Union prompted both sides of the aisle to agree the program is “off the books.”

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While that stance is popular with the public, some experts say it is ill-advised.
“It’s fundamentally irresponsible to say we’re not going to touch it when everybody who’s ever looked at the finances of the program recognizes that it’s going bankrupt,” said Whit Ayres, president of North Star Opinion Research, a center-right political polling operation.
The situation presents an opportunity for a hero to emerge, one who can put the program on sound financial footing, Ayres said.
One longshot Republican hopeful — former Cranston, Rhode Island, mayor Steve Laffey — plans to enter the race with his own bold plan to reconstruct Social Security as the first priority on his agenda.
“Our biggest problem is this: We as Americans simply don’t directly confront our problems,” Laffey said.
Social Security is the “ultimate example of that,” he said.

Changes needed ‘sooner rather than later’

A crucial inflection point, particularly for Social Security, is coming, according to the program’s trustees.
Social Security’s combined funds will only be able to pay full benefits until 2034. At that point, just 80% of benefits will be payable if nothing is done sooner.
Lawmakers on both sides of the aisle would need to agree on fixes for the program. These could include benefit cuts, such as raising the retirement age, tax increases or a combination of both.
But with Democrats vowing to protect benefits and Republicans swearing off tax increases, that has thus far left little room for compromise.

As Washington leaders recently worked out a deal to raise the nation’s debt ceiling for two years, the cost of Social Security and Medicare came under scrutiny.
Both Social Security and Medicare fall under the category of mandatory spending, which altogether represents more than two-thirds of the nation’s budget, according to the Tax Foundation.
Consequently, it is impossible to address the nation’s spending without addressing those programs, according to Tax Foundation economist Alex Durante.
“The longer we push this out, it becomes more difficult to try to protect everyone that receives the benefits,” Durante said. “It’s important that we tackle this sooner rather than later.”

Proposal for ‘modern version’ of Social Security

The Social Security plan Laffey would implement throws out the traditional approaches of tax increases or benefit cuts.
Instead, he wants to gradually phase out the FICA tax completely. Currently, workers and employers each pay 6.2% on up to $160,200 in wages toward Social Security.
That would be replaced by new Personal Security System accounts, to which workers would contribute 10% of their pay. Those balances would be invested in a weighted index of global stocks, bonds and other securities.
The plan comes from Laurence Kotlikoff, a Boston University economics professor who has devoted much of his career to helping people get the most from Social Security and demystifying the program’s many rules.
Kotlikoff himself ran for president in 2012 and 2016 as a third-party candidate. In subsequent election cycles, he has urged Laffey to run.
The two met when Laffey was working on “Fixing America,” a 2012 documentary about Americans’ perspectives on fixing the country’s problems post-financial crisis. Laffey wrote and co-produced the documentary, for which he interviewed Kotlikoff.
Laffey, a former Morgan Keegan executive, has mostly been out of politics after serving two terms as mayor of Cranston, Rhode Island.
He ran for a U.S. Senate seat in Rhode Island in 2006 and then in 2014 pursued the Republican nomination for a U.S. House seat representing Colorado, where he now lives. He was unsuccessful in both races.

Republican 2024 presidential hopeful Steve Laffey arrives for an interview at a local TV station in Cranston, Rhode Island, on March 17, 2023.
Ed Jones | Afp | Getty Images

Laffey launched a campaign for mayor at a time when Cranston had the lowest bond rating in America, he said. The big accomplishment he boasts as Cranston mayor is bringing the city’s bond rating up. The city’s S&P rating climbed to an A- in 2006 from a B in 2002, according to a spokesman for Laffey.
The Social Security plan would be a fully funded system, where you get your money back in the form of an inflation-indexed annuity, according to Kotlikoff.
“It’s a modern version of Social Security,” Kotlikoff said.
The goal would be to give beneficiaries a bigger return on the money than they get now.
It also aims to address the program’s current inequities. The government would make matching contributions on behalf of lower earners, the disabled and unemployed. Spouses would share their contributions to the program equally.
The investment strategies would be computerized and custodied by the federal government, not by Wall Street. Everyone would get the same rate of return, Kotlikoff noted.
The expectation is that over a 40-year time horizon the accounts would be able to make up for down years and ultimately provide workers with more money than today’s Social Security program.
The hope is a worker who is 20 years old in 2025 may eventually stand to get $10,000 per month, rather than $2,000, which would be a “lot better,” Laffey said.
The plan coincides with Laffey’s plans to overhaul government spending, such as changing the Federal Reserve’s inflation target to zero, rather than the current goal of 2%, in order to force Congress to work within its budget.

‘Both sides are going to have to give’

Because any changes to Social Security involve strict emotions, the big question is whether lawmakers and Americans would be ready to embrace a new direction for the program.
The idea of rethinking the way Social Security funds are invested has come up before.
While in office, President George W. Bush had proposed letting Americans save part of their Social Security taxes in personal retirement accounts, referred to as “partial privatization.”
Andrew Biggs, who worked in the White House on Social Security reform at the time and who is now a senior fellow at the American Enterprise Institute, remembers the proposal did not come close to succeeding, even as Social Security still had surpluses and Republicans controlled both houses of Congress.
Consequently, privatization — where personal accounts are funded out of part of the existing payroll tax — would be a long shot, he said.
“If Bush couldn’t do it then, despite a great effort, that’s not happening now,” Biggs said.
But personal accounts funded on top of the existing Social Security program, such as ensuring everyone signs up for a retirement plan at work, could be “more possible,” he said.
Another challenge may be getting Americans to embrace the idea.
The only people who like personalized accounts are affluent, college-educated white men, said Celinda Lake, a Democratic pollster and president at Lake Research Partners, who has conducted focus groups with married couples on the subject.
Women of all ages, who are very worried about the future of the program for their own economic security, are less likely to embrace the idea, she said.

Biden and Trump campaign signs are displayed as voters line up to cast their ballots during early voting at the Alafaya Branch Library in Orlando, Florida, Oct. 30, 2020.
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For candidates, taking such a position can also jeopardize their primary and general election viability, Lake said.
Yet Ayres, of North Star Opinion Research, sees an opportunity for reforms much like President Ronald Reagan helped usher in, which put Social Security on sound financial footing for half a century, he said.
That likely won’t come from an “unworkable” overhaul of the program, Ayres said, but instead more marginal changes, such as raising the retirement age by several months and increasing the cap on Social Security earnings.
Like Reagan’s efforts, it would also require bipartisan commissions, he said.
As with the newly inked debt ceiling deal, “both sides are going to have to give a little bit,” Ayres said.
“Just putting your head in the sand and waiting for it to go bankrupt is a fundamentally irresponsible position,” he said. More

If you’re planning to donate money, certain charitable giving moves provide a bigger tax benefit, experts say.
The Tax Cuts and Jobs Act of 2017 increased the standard deduction, making it harder to claim charitable tax breaks.
But donor-advised funds and qualified charitable distributions from pre-tax individual retirement accounts may be worth exploring.

Donald Gruener | iStock | Getty Images

LAS VEGAS — Tax savings aren’t typically the main reason for philanthropy. But if you’re planning to donate money, certain charitable giving strategies provide a bigger tax benefit.
Since the Tax Cuts and Jobs Act of 2017, there’s been a higher standard deduction, which makes it harder to claim charitable tax breaks, explained Christopher Hoyt, a law professor at the University of Missouri in Kansas City.

Roughly 33% of taxpayers itemized deductions in 2017, compared to fewer than 10% in 2021, said Hoyt, speaking at the American Institute of Certified Public Accountants’ annual conference in Las Vegas on Tuesday.  
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For 2023, the standard deduction is $13,850 for single filers and $27,700 for married couples filing together, and there’s no benefit to itemized deductions — including charitable gifts, medical expenses and more — until the combined amount exceeds the standard deduction.
Given these constraints, investors can maximize tax breaks by “bunching gifts,” Hoyt said. “Concentrate your gifts in one year, as opposed to spreading them over several.”

Consider donor-advised funds for ‘bunching’

One popular option for bunching gifts is the so-called donor-advised fund, which provides an upfront tax break while acting like a charitable checking account for future gifts.

Donor-advised funds have exploded since the 2017 tax law change, and more than 75% are less than five years old, according to Hoyt. However, it’s unclear whether they will remain as popular once the increased standard deduction sunsets in 2026.

Typically, the best assets to donate to charity, including donor-advised funds, are profitable investments from a brokerage account because you can bypass capital gains taxes, which results in a bigger gift to charity. 
Nearly 60% of 2022 contributions to Fidelity’s donor-advised fund were non-cash assets, such as stocks, and many chose to donate assets with built-in gains, the organization reported.

Shift to individual retirement accounts at 70½

Once you’re age 70½ or older, it’s typically better to donate funds from pre-tax individual retirement accounts, known as qualified charitable distributions or QCDs, Hoyt said.
You can donate up to $100,000 per year from your pre-tax IRA, he said, and the “secret sauce” is that QCDs can satisfy your required minimum distributions.

“The big winners are donors who take the standard deduction,” Hoyt said, because QCDs don’t count as income, which can penalize seniors through higher Medicare Part B and Part D premiums.
To qualify, you must transfer the money directly from an IRA to an eligible charity and get a confirmation from the organization that you received no benefit in exchange, he said. More

After a more than three-year reprieve, federal student loan bills will restart within months.
With the Biden administration working to overhaul the student loan system, borrowers may see a number of changes when they begin repayment, or not long afterward.

Douglas Rissing | Istock | Getty Images

1. Lower payments from forgiveness (maybe)

Last August, Biden rolled out an unprecedented plan to cancel $10,000 in student debt for tens of millions of Americans, or as much as $20,000 if they received a Pell Grant in college, a type of aid available to low-income students.
However, the administration’s application portal had been open for less than a month when a slew of legal changes forced them to shut it. The Supreme Court has agreed to hear two of those lawsuits against the plan.

The justices are still debating the validity of the debt-relief policy and are expected to make a ruling by the end of the month.
If the highest court greenlights the president’s program, roughly a third of those with federal student loans, or 14 million people, would have their balances entirely forgiven, according to an estimate by higher education expert Mark Kantrowitz.
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These borrowers likely won’t have to make a student loan payment again, Kantrowitz said.
For those who still have a balance after the relief, the Education Department has said it plans to “re-amortize” borrowers’ lower debts. That’s a wonky term that means it will recalculate people’s monthly payment based on their lower tab and the number of months they have left on their repayment timeline.
Kantrowitz provided an example: Let’s say a person currently owes $30,000 in student loans at a 5% interest rate.
Before the pandemic, they would have paid around $320 a month on a 10-year repayment term. If forgiveness goes through and that person get $10,000 in relief, their total balance would be reduced by a third, and their monthly payment will drop by a third, to roughly $210 a month.
But if the high court strikes down the policy, most borrowers will likely have the same monthly payment they had before the pandemic, Kantrowitz said.

2. A new income-driven repayment option

The Biden administration is working to roll out a new, more affordable repayment plan for student loan borrowers.
That option revises one of the four existing income-driven repayment plans, which cap borrowers’ bills at a share of their discretionary income with the aim of making the debt more affordable to pay off.
Instead of paying 10% of their discretionary income a month, under the new program — the Revised Pay as You Earn Repayment Plan — borrowers would be required to pay 5% of their discretionary income toward their undergraduate student loans.

Kantrowitz provided an example of how monthly bills could change with the overhauled option.
Previously, a borrower who made $40,000 a year would have a monthly student loan payment of around $151. Under the revised plan, their payment would drop to $30.
Similarly, someone who earned $90,000 a year could see their monthly payments shrink to $238 from $568, Kantrowitz said.
The payment plan should become available by July 2024, he said, although, “it is possible that the changes could be implemented earlier, as the U.S. Department of Education has the flexibility to implement regulatory changes sooner in certain circumstances.”

3. A new servicer handling their loans

Several of the largest companies that service federal student loans announced during the Covid-19 pandemic that they’ll no longer be doing so, meaning many borrowers will have to adjust to a new servicer when payments resume.
Three companies that managed the loans — Navient, the Pennsylvania Higher Education Assistance Agency (also known as FedLoan) and Granite State — all said they’d be ending their relationship with the government.
As a result, about 16 million borrowers will have a different company to deal with by the time payments resume, or not long afterward, according to Kantrowitz.

“Whenever there is a change of loan servicer, there can be problems transferring borrower data,” Kantrowitz said. “Borrowers should be prepared for the possibility of glitches.”
Affected borrowers should get multiple notices about their change in lender, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
If you mistakenly send a payment to your old servicer, the money should be forwarded by the former servicer to your new one, Buchanan added. More