Are you having problems paying student loans? Here’s what to do
Paying college is not that easy. Student loan debt is at an all-time high of over $ 1.5 trillion in the US. For borrowers dealing with this college cost debt, the payments can be a burden – especially during a pandemic that has resulted in job losses and economic downtime.
Fortunately, the CARES Act provided some emergency relief, at least for federal borrowers. The loan facilitation measure, passed in March 2020, allows borrowers to pause their student loan payments – interest-free – until September 30, 2021.
How can i get help with student loan repayment?
However, this is not the only option available to those struggling to repay loans. If you find it difficult to pay the monthly student loan payments after leaving school, one of the following strategies and repayment options can help.
Forbearance, which is technically what the CARES Act provides, allows borrowers to suspend payments due to hardship. Forbearance is available for both government and private student loans, and typically the borrower pays all or most of the interest accrued during the break.
Borrowers can choose to pay the accrued interest (monthly) or add it to the loan balance, which ultimately means higher interest costs over the life of the loan.
Fortunately, neither option is required under the CARES Act. Federal debt borrowers will enjoy 0% interest through at least September 30 if payment deferral protections are about to expire.
In either case – under the CARES Act and in other situations – requesting a deferral should not affect your creditworthiness. While your servicer can record your deferral plan on your credit report, it shouldn’t affect your score as long as you resume payments as agreed.
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You can also consolidate your student debt which essentially consolidates all of your loans into one, streamlining repayment, and in many cases lowering your interest rate and monthly payment.
If you have federal loans, you would use a direct consolidation loan. This allows you to keep all the benefits of federal student loans (e.g. forgiveness, income-based repayment plans, etc.) while also consolidating your loans with no additional fees.
“When you’re making payments on various federal loans, consolidation is the best way to reduce stress and multiple payments while staying organized with your loans,” said Leslie Tayne, founder and debt relief attorney, Tayne Law Group.
For private student loans, you have to carry out a so-called refinancing. This is when you apply for a new personal loan and then use that to pay off all of your existing loans. Getting a new loan at a lower interest rate than you are currently paying is usually a smart move.
Are you thinking about refinancing your personal student loans? Use an online student loan refinance calculator to get a feel for what your new payment might look like.
Deferment is similar to forbearance, except that your loan will not receive interest while your payments are paused – at least on subsidized federal loans.
“The difference between forbearance and respite has to do with your accrued interest,” said Tayne. “If you opt for your student loan and are eligible for a deferral, you don’t have to make any payments, but the interest still accrues. If you postpone your student loans, you will not have to make any payments and the loans will no longer accrue interest. “
WHY SHOULD YOU CONSIDER REFINANCING PRIVATE STUDENT LOANS
There is one exception, however: If you have an unsubsidized federal loan, you still owe interest during the deferral period. Just like forbearance, this can be paid monthly or rolled into your loan balance.
Change your repayment schedule
Changing your repayment schedule can also help. For private borrowers, this can mean extending your repayment term and spreading your payments over a longer period of time. This would lower monthly payments and make them more manageable, making you less likely to miss out on payments or incur a late fee for overdue payments.
In some cases, you may need to refinance your personal student loans to change your repayment deadline. Visit Credible to learn more about personal student loans and get personalized rates from multiple lenders without compromising your creditworthiness.
WHY MAY REFINANCE ELDERLY AMERICANS WITH STUDENT LOAN DEBT?
For federal borrowers, adopting an income-based loan repayment plan could be helpful. These allow you to make payments based on your actual income.
The federal government currently offers four different income-based repayment plans, some of which require as little as 10% of your monthly income. The plans run for 20-25 years and once you have made your minimum payments for that period, your remaining loan amount will be waived.
The bottom line
If you’re struggling to repay your student loans, options are yours. Check with your loan service provider to see what might be eligible, or consider consolidating or refinancing your loans to make payments more affordable.
Ready to act? Visit Credible to view your student private loan options now.
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