What to Do with Your Remaining Student Loan Debt

Student loan relief has been a hot topic particularly in recent years. With repayment plan information in limbo, it’s important to know what you can do to set yourself up for success moving forward.

Forbearance Period

There have been multiple forbearance periods given to those with student loan debts. While the government goes back and forth about the terms of loan forgiveness, borrowers have been unsure about what they should be doing. An article written by Cecilia Clark and Trea Branch for nerdwallet.com explains this uncertainty by saying, “On Nov. 22, borrowers got more time to plan. The Biden administration extended student loan payment forbearance until the debt relief plan clears its legal challenges, perhaps until late summer 2023, unless the legal roadblocks are resolved before then.

When borrowers do resume payments, they won’t just pick up where they left off in March 2020, when payments and interest were halted. Payment amounts and options could be different.

If you haven’t looked at your loan information in a while, now is the time for a review. Knowing your remaining balance, interest rate and expected monthly payment will reveal the help you need and which payment plan benefits you the most.”

Public Service Employees

Public service employees could be eligible for additional loan forgiveness. Typically, you must pay 120 monthly payments before your debt is forgiven. However, with a new Income Driven Repayment waiver, there is potential to get your debts wiped out much sooner. The above mentioned article states, “The IDR waiver will wipe clean debts for borrowers who have been paying on their federal loans for 20 years or longer and for borrowers who’ve worked in public service for 10 years.”

You simply have to fill out a PSLF (Public Service Loan Forgiveness) application before May 1, 2023. The good news is that the last couple years of forbearance period still count towards your 120 months of payments. This waiver could help you drastically reduce your monthly payment depending on your income. It could also wipe out your student loan debt altogether depending on how long you’ve been paying. It’s definitely worth looking into!

Make Regular Payments

If you’ve gone through the pandemic and been comfortable making your normal payments, continue to do so. You’ll have saved yourself a lot of money in the long run because your payments have been going directly towards your principle.

If you haven’t been making regular payments, start setting aside money now. This will ensure that the amount fits back into your budget when it’s time for payments to resume.

Make Smaller Monthly Payments

If you haven’t been able to make your normal student loan payments, consider making regular, smaller payments. If money is a serious issue, contact your lender to see if you can switch to an income driven plan that better suits your needs. Income driven repayment options are typically around 10% of your discretionary income. If your income is low, your payment might even be zero dollars.

Work Towards Faster Payoff

If you’re comfortable making your monthly payment and want to knock out your loan as fast as possible, you have that option as well. To do this you can make extra monthly payments. When you do, ask your servicer to apply the extra payment directly towards your principle instead of your interest. This will definitely save you money in the long run. You won’t accrue as much interest as your principle amount decreases. Another strategy for paying your loan down quickly is to make payments bi-weekly.

Refinancing

Lastly, you also have the option to refinance your loans once the period of forbearance is over. If you have high interest loans, loans that don’t qualify for any relief programs or private loans, definitely look into your refinancing options. While interest rates have been rising, those with good credit should still be able to find an interest rate they’re happy with. Experts recommend waiting until well into 2023 in order to refinance when the period of forbearance is over. In the meantime, you can work on improving your credit score in order to secure the best interest rate possible.

Those with student loans are keenly aware of how confusing the loan forgiveness conversations have been. While so much is out of your control, you have the ability to prepare yourself financially for when the period of forbearance ends. Do your research, make a plan and get ready to tackle your student loan debt.