The presidential election is only a few weeks away, and the outcome of this race will have significant effects on how student loan borrowers can manage their student debt. One of the most pressing issues for these borrowers is whether or not former Vice President Joe Biden’s student loan payment freeze will end before they can pay off their loans. If he loses, it will be back to paying upfront monthly payments, which can be difficult for many people already struggling financially.
Make sure you are on the right repayment plan.
When you hear about the student loan crisis, it is often suggested that borrowers should pay more than they optimally would get out of debt faster. However, suppose this isn’t possible for them, and they do not make enough money or qualify for a lower monthly payment plan to afford larger payments. In that case, there are still other options available. Here are the types of repayment plans:
Income-Driven Repayment Plan
One option available through StudentLoans.gov is Income-Driven Repayment Plans (IDRs). There are several different types of IDR plans based on your income level which allow you to repay your federal student loans according to how much money you currently earn each month instead of requiring every borrower with an eligible type of repayment plan to pay $50 per month regardless their specific financial situation.
One side effect of this is that borrowers can keep their monthly student loan payments as low as $0 per month. If you have a federal student loan, it’s essential to find the right repayment plan for your financial situation – whether or not you can afford larger payments each month. Make sure you’re in the right place – because sometimes switching over from an IDR to another one could save hundreds of dollars every year!
Borrower Benefits and Mortgage Payment Deferrals
Another way to reduce your student loan debt is by taking advantage of the borrower benefits that might be available through your federal student loans. For example, if you have a Federal Direct Loan – there may be an option for borrowers who cannot pay their monthly mortgage payments due to high student loan debt. Unfortunately, this isn’t always available, but it’s worth looking into!
If you’re worried about what might happen if your student loans are deferred due to unemployment or economic hardship – don’t worry! You can qualify for forbearance, which would temporarily put off paying back your federal student loans and catch up on any missed payments.
As a borrower, it is crucial to make sure you are on the right repayment plan. Make sure your monthly student loan bill fits within your budget, and don’t be afraid to look into income-driven programs or forbearance if necessary!
Deferment and Forbearance
Another type of repayment plan that is available to borrowers with federal student loans is deferment and forbearance. If you cannot make your monthly student loan payments, these can be an excellent option for temporarily putting off paying back your loans!
They only apply if the following circumstances exist: you have no other options to pay back your federal student loans (such as an income-driven repayment plan), and the reason you are unable to make payments is due to unemployment, economic hardship, or military service.
Note: You can still use deferment and forbearance if you have a private loan – but only for public interest purposes! If this applies to you, you should contact your lender to see what options are available.
Now that you know about deferment and forbearance, it’s important to remember that they will not last forever. If you have a federal student loan – only one of the two repayment plans can be in effect at any given time, with an option for how long each lasts determined by your lender.
Knowing what type of student loan debt you are in.
It’s essential to find the right repayment plan for your financial situation – whether or not you can afford larger payments each month. Make sure you’re in the right place – because sometimes switching over from an IDR to another one could save hundreds of dollars every year!
Federal Student Loans
Federal student loan borrowers have several options when it comes to making their student loan payments. While you might not be able to afford larger payments each month, there are still ways that you can reduce your monthly bill and save money in the long run! These options include income-driven repayment plans, borrower benefits through federal student loans, deferment, or forbearance.
If you’re not sure which repayment plan is suitable for your financial situation, make sure to ask! If you still think there might be another option available – don’t be afraid to reach out and see if the federal student loans people can help. You won’t know unless you try!
Federal student loan payments are automatically set to $0 per month – if the borrower qualifies for this option, they will not owe anything at all.
Undergraduate federal student loans
You can pay $0 per month or accrue interest on your subsidized and unsubsidized loans for up to three years.
Graduate federal student loans
Only the same as an undergraduate if they’re both subsidized. Otherwise, just interest will build upon them until it’s paid back. If a graduate loan is not supported, then there may be an additional payment option available for this type of federal student loan.
Public service forgiveness
If you are employed in the public interest, then your accrued but unpaid interest will be paid later after your federal student loans have been forgiven under certain circumstances.
Private student loans
Federal loans are only eligible for a deferment if the borrower is unemployed or unable to make their monthly payments due to an economic hardship! If this applies, speak with your lender about what might be able to help you get back on track.
Private student loan borrowers can apply for forbearance if they are unemployed or unable to make their monthly payments due to economic hardship.
Note: A private student loan does not have federal repayment options available.
Consider consolidating your loans with a private lender to take advantage of lower interest rates.
If you’re considering consolidating your federal student loans to a private lender, it may be best to do so before Biden’s payment freeze ends. Although this will result in all of your debt being lumped together into one single loan with one interest rate, some borrowers can save money by doing so because they qualify for lower rates.
It’s important to weigh whether or not you would be better off consolidating your debt and taking advantage of lower interest rates, especially if Biden’s payment freeze ends before you can save up enough money for a one-time lump sum. This will depend on the amount that each loan currently has in interest versus how much it could accumulate over time under an alternative repayment plan such as IDRs – which are available even when your student loans have been consolidated with a private lender.
Take out a personal loan or cash advance to pay off your student loans early.
If you cannot afford larger monthly payments, one option is to take out a personal loan or cash advance if your bank offers this service – which most central banks do now! You can borrow money from them and pay off all of your federal student loans with it (or even private ones too).
After doing so, make sure not to miss any future payment due dates because if you do, they will charge late fees for each missed payment and interest on the amount outstanding until paid in full. This is why borrowers choose to move their debt onto another form of credit, such as a credit card.
Contribute more than the minimum payment each month, but not so much that it causes financial hardship.
The more you pay, the faster your loan principal will decrease and, thus, lower what you’ll ultimately owe.
Make a payment every month, even if it is only the minimum amount due. However, resist making too low payments to cover additional interest charges or late fees because those costs can add up over time and make your debt much worse.
If you can’t afford to make additional payments, consider applying for an income-driven repayment plan. Income-Based Repayment (IBR) is one option that bases your monthly payment on a percentage of your discretionary income, which could be as low as $0 per month during specific periods of economic hardship. For more information about income-driven repayment plans, click here.
Other options for reducing the cost of student loans include consolidating your federal student loans or getting a private consolidation loan from a bank or credit union. In addition to lower rates and fees, if you have several types of debt with multiple lenders, this option could save you money on paying off all those separate debts.
Apply for deferment if you cannot afford monthly payments due to unemployment or other economic hardships.
Sign up for auto-debit to have your monthly payment automatically drafted from a checking account. This makes it easier to stay on top of prices because you won’t forget or miss the due date. It also lowers interest charges because any overpayments will be applied to the principal balance first.
Research student loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF), if working in an eligible job is essential to you and can help reduce stress about repayment. However, keep in mind that this program only applies if the federal government is your employer; private companies are not included for PSLF eligibility purposes even though many offer similar plans for employees and veterans with qualifying who work full time with them continuously.
File an appeal if you feel like your situation warrants one and have documentation supporting your claim.
An excellent place to start is the Federal Student Aid Ombudsman Group. If you haven’t already, contact your lender and try to work out a deferment or forbearance.
Contact your Loan Servicer and ask about repayment plans that will work best for you. If you’re experiencing financial hardship, consider deferment or forbearance if it makes sense to do so, given your situation.
In conclusion
There are many ways to reduce student loan debt. One of the most obvious ways is to pay your student loans on time. Another way would be to consolidate your debt under a lower interest rate. You can also pay more than the minimum required payment each month to faster reduce your student loan debt. Lastly, you could try applying for a hardship program with your servicer if you have trouble making ends meet. EdFed offers Student Loan programs for you to know more about before applying.
