Caught in the Student Loan Storm? Here’s Your Lifesaver
Worrying about your student loan payments? Here are the options you have come October and beyond.
Has it already been 8 months? Time flies when you aren't paying bills.
For some, they have used the time (and extra income) wisely; paying down other high-interest debt, saving an emergency fund, or just kept paying on schedule.
But we know there are some out there that are shocked about their payments returning and now are hitting their "Oh $h!t" moment as to how they will cover them in the fall.
You have a few options still left to sift through.
Sweet Deal of Loan Forgiveness
Enter stage right, Biden administration, with a truckload of student loan forgiveness. The rules are simple - if you make less than $125,000 annually or if you and your spouse earn less than $250,000 combined, you could be eligible for federal loan forgiveness up to $10,000.
The deal gets even sweeter for current and former Pell Grant recipients under these income thresholds, who can qualify for an additional $10,000. Just remember, this forgiving gesture is currently paused due to some pesky ongoing litigation.
Certain occupations even qualify for federal programs that wipe the student loan slate clean after several years. Let's say you're in an eligible public service job – the Public Service Loan Forgiveness (PSLF) program forgives loans after 10 years of payments on an income-driven repayment plan.
- You must be employed by a U.S. federal, state, local, or tribal government or not-for-profit organization, including the U.S. military.
- Work full-time for the qualifying agency or organization.
- Have Direct Loans or consolidate other federal student loans into a Direct Loan.
- Repay loans under an income-driven repayment plan.
- Make 120 qualifying payments
For the educators among us, the Teacher Loan Forgiveness program dismisses up to $17,500 in federal debt after five years of service in a high-need area. Isn't that a teachable moment?
Forbearance
You'd be surprised to know that the current administrative forbearance period is automatically awarded to all federal student loan borrowers. Plus, there's general forbearance on offer for those struggling with financial difficulties, medical expenses, or job changes.
This forbearance grants you up to 12 months of breathing space (capping at three years) if you're having a hard time making loan payments. Interested? Your loan servicer has all the deets.
Repayment Plans that Won't Break the Bank
Income-driven repayment plans are designed to be light on your wallet. They base your monthly payment on a fraction of your discretionary income.
Usually, after 20 to 25 years of eligible payments, the rest of your balance says adios. With low enough income, your payments could even drop to zilch! Reach out to your loan servicer to find a plan that fits like a glove.
Refinance to Reduce
Refinancing federal student loans won't look as attractive once you've considered the relief options above. However, if you originally borrowed when interest rates were soaring and you still have a lingering balance after student loan forgiveness, refinancing could be the way to go.
Snagging a low rate with a private lender and switching to a different rate or term post-forbearance could lower your monthly payments. Just something to mull over.
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