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A college education is often one of the first and most important investments in the life of a young adult. Unfortunately, it has become very expensive to pursue higher education. Tuition costs have been rapidly rising at both state and private institutions...
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Getting Rid ofYourStudent Loans The Graduate’s Guide to
Introduction • Although a college education is the most important investment in the life of a young adult, paying the rapidly rising tuition costs can become a life-long burden. • Student loans now total over one trillion dollars in the US. • It’s important to understand all the available options for getting these loans paid off. Otherwise, you’ll likely pay more than necessary.
Repayment Plans You have a choice.
1.Standard Repayment Plan Your loan servicer is the company that deals with all the billing and other issues associated with your federal student loans. The standard repayment plan is always the least expensive over the long term.
2.Graduated Repayment Plan Payments start lower than with the standard repayment plan. The payment amount increases over time, usually every 2 years.
3.Extended Repayment Plan You can extend your payments for up to 25 years, which can significantly reduce your payments. However, you’ll likely end up paying more interest over the extended length of the plan.
4. Income-based Repayment Plan Payments are based on your discretionary income. Discretionary income is the difference between adjusted gross income and 150% of the poverty level for your family size and state of residence.
5. Pay as You Earn Repayment Plan Maximum monthly payment: 10% of discretionary income. As with the income-based repayment plan, your payments change along with your income.
6. Income-Contingent Repayment Plan Payments are based on gross adjusted income & recalculated each year. Your family size and the amount of your loan is also included in the calculation.
About Loan Repayment Plans • Many loan payment options are available. • The standard plan will likely be the least expensive over the lifetime of the loan. However, sometimes the best choice isn’t the most obvious. • Consider all repayment options and choose the best one for your situation. • Use the many calculators available online to determine how much you can expect to pay.
Loan Consolidation Combine all of your loans into one to make a single payment each month. Extend your payments up to 30 years.
Deferment & Forbearance Temporarily stop or reduce your payments.
Deferment:Meet 1 of These Requirements • Be enrolled in school at least ½ time • Have a graduate fellowship or be in an approved rehabilitation training program for the disabled • You’re unemployed. • You have economic hardship or are in the Peace Corps. • You’re active military in time of war, national emergency, or military operation. • It’s during the 13 months following qualifying active military service.
Mandatory Forbearance(Lender must allow forbearanceif you meet any of these requirements.) • You’re in a dental or medical residency. • The total of your student loan payments is 20%+ of your gross monthly income. • You’re a teacher that qualifies for loan forgiveness . • You’re an activated member of National Guard but ineligible for deferment. • You’ve received a national service award and are still serving in that role. • You’re eligible for partial loan repayments through the US Defense Department Student Loan Repayment Program.
Discretionary Forbearance • A discretionary forbearance is up to the discretion of your lender. • You can request a discretionary forbearance in situations of financial hardship and illness. • Just like a deferment, you’re required to request either type of forbearance from your loan servicer. • Documentation is frequently requested.
Forgiveness, Cancellation, and Discharge Eliminate some or all of your student loan debt.
Death Discharge If you die, a family member can provide a copy of your death certificate to the loan servicer and have your loan discharged.
Other Programs • Check with your state and research private organizations active in your community, as some offer to pay some or all of your student loans when you qualify for their program. • Some employers even pay student loans now as an employee benefit. Research the employers in your locale to see if there are any such jobs available in your field.
Understanding Default Avoid default if at all possible.
The Road to Default Your loan is technically delinquent the day after you miss a single payment. As soon as your loan is 90 days delinquent, it will be reported to all three major credit bureaus. Your loan is considered to be in default if you fail to make a payment for 270 days.
Ways to Pay Off Student Loans Quickly Pay off your loans faster.
Conclusion • It’s important to be responsible about student loans as they stand to affect your financial life for a long time. • The government is powerful and could have profound effects on your life, should you not pay your loans as agreed. • Many options are available to you to ease stress about your loans: forgiveness, cancellation, forbearance, and more.
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