In the U.S. alone, hundreds and hundreds of existing and former students are contributing to the federal student loan portfolio. The total currently sits at around $1.6 trillion. It is getting increasingly more challenging for students to find employment once they’ve left university. This statistic is only increasing, yet the cost of student loans remains the same.
Unfortunately, lenders don’t spare a thought about whether someone is employed or not. They only care about the money. So, whether you are just about to start repaying your student loan or have been repaying it for a while now, you might be worried about affording your payment amount if you’re not already struggling.
Student loans are often one of those things that feel hopeless. However, there are various solutions available to students nowadays that might be able to ease their financial burden. From private student loan forgiveness to temporary relief, this article outlines several things for students to consider if they are in arrears with their student loans.
1. Apply for Temporary Relief
Providing that you’re in a short-term financial bind if you’re experiencing financial trouble and finding it hard to meet your student loan repayments applying for temporary relief like forbearance or a deferment can help you press the metaphorical ‘pause’ button on your payments. We know what you’re thinking, this sounds too good to be true, right?
In short, it could be. Since putting your loans in forbearance or a deferment is by far a hall pass and could prove to be a very costly endeavor later down the line as you still accrue interest while your payments have stopped or been reduced.
Not to mention, applying for forbearance or deferment can be trickier depending on whether you have a federal or private loan. Furthermore, you may have to meet specific requirements for approval.
Additionally, if you’re looking at exploring possible loan forgiveness options in the future, applying for forbearance or a deferment can impact these options as well.
Providing that your current student loan is a federal one, dozens of student loan forgiveness options are available. However, if your student loan is private, you have much fewer options. Some federal student loan forgiveness options include Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, Closed School Discharge, False Certification Discharge, and more.
If you meet the requirements for one of the above options, you’ll be released from having to repay your borrowed sum in whole or in part. However, if you are one of the 8% of American students with a private student loan, forgiveness is a lot more challenging topic.
Federal forgiveness options are granted by the U.S. Department of Education so that the U.S. government can easily absorb the cost of these loans. Whereas in the case of private student loans, if forgiveness were granted, the U.S. government would have to repay the loan-issuing company. Hence, why forgiveness options are much slimmer for students with private loans.
In most cases, the only circumstance when forgiveness is granted for a private loan is when the borrower has passed away or suffered a permanent/total disability. Learn more about private student loan forgiveness on Tally’s blog. This is a credit card payoff app manufacturer, which contains helpful resources about student loans, debt repayment, and personal finance. Consider visiting their site to learn more, or sign-up for their newsletter today.
3. Sign Up for an Income-Driven Repayment Plan
Another way you can better manage your student loan repayments is by signing up for an income-driven repayment plan (IDR). This considers your income and family size and determines your loan repayments based on those factors – making it more affordable.
Depending on what IDR plan you apply for, you can reduce your payments to as little as 10%. To get a better idea of what your payment may be, use the income-driven repayment plan calculator. It will ask you several questions about your income and family life to produce an estimate your payment.
On the other hand, if you are in a fortunate position where you already have an IDR plan but are still experiencing financial difficulty, you could consider approaching your provider and asking them to recalculate your plan. Typically, changes will only be implemented if you’ve experienced any shifts in your working or family life. Some examples include a loss of income or welcoming a new arrival, etc.
Likewise, if you would like to switch from one IDR plan to another, much like switching service providers, a different plan may offer you benefits that your current one doesn’t. The best thing is that you can change it at any time in order to fit your needs.