by Repayable | May 29, 2017 | Getting started
Start here if you’re just starting to figure out your student loans. It’s the road map for student loan debt. Follow the map and you will end up with a strategy for repayable student loans. Estimated read time ~10 minutes.
Find out how much student loan debt you have.
The very first step in finding a way to make your student loan debt repayable is to figure out exactly how much you owe. You may have a sense of how much you owe i.e. around $40,000. But the key to obtaining freedom from debt is to know your debt well, which means knowing the exact amount you owe. There’s a big difference between about $40,000 and $43,700.
You can find your total debt by logging in to the website of your loan servicer(s) and looking at your total loan amount. If you have multiple servicers, add the individual loan amounts together.
Start by reading the post How to Figure out How Much Student Loan Debt You Have.
Find out if you have federal or private student loans.
Federal and private loans may have different strategies for repayment so it’s important to know which type of loans you have.
The post How to Figure out if You Have Federal or Private Student Loans gives you a detailed how-to.
Determine when you have to start repaying your loans.
If you’re not already in repayment, you next step is to figure out when you’ll need to start repaying your loans. Federal loan repayment typically begins six months after graduation for Direct and Stafford loans but can differ for Perkins and Plus loans. Private loan repayment grace periods vary by lender so you’ll need to contact your private lender to figure out exactly when you’ll need to begin repayment.
Determine your repayment plan.
Your repayment plan dictates your financial approach to student loans. Be sure you’re in a plan that matches your desired approach to loan repayment. Read the posts How to Figure Out Your Repayment Plan for a step-by-step guide and Should You Break Up With Your Student Loan Repayment Plan? to get a sense of the key tenants of repayment plans so you can pick the best one.
Look at your interest rates.
When you go to your loan servicer’s website and look at your total loan amounts your interest rate for each loan should be listed next to the loan amount. Your interest rate helps you decide where to allocate extra payments (higher interest loans should generally be your first target all else equal).
Determine your financial state of affairs using debt:income ratio.
Are your student loans a financial nightmare? Are they really? The media will tell you yes, old school graduates will tell you it’s your own fault, so where is the truth? The truth lies in a simple mathematical tool called debt:income ratio. Find out how to calculate it (swear to god you only need basic arithmetic) and what it tells you by reading How Bad is Your Student Loan Debt? A Simple Answer.
Avoid Default
If things aren’t looking so rosy for you on the student loan debt front don’t worry, there are options. Check out Don’t Default on Student Loans: Do This Instead and Student Loan Repayment Panic? Let’s Talk About Deferment and Forbearance.
Decide your next steps.
After you gain an understanding of your student loans you may realize your best option isn’t just optimizing your repayment plan. If you think your best options is refinancing or loan forgiveness you can learn more about those topics by checking out the refinancing posts on the blog or loan forgiveness posts on the blog or by watching videos on the Repayable YouTube channel. The guides for refinancing and loan forgiveness are coming soon.
Additional Resources:
Federal Student Aid Understanding Repayment
Nerd Wallet Understanding Student Loans
Accessing your Student Loan Information Through NSLDS FAQ
A Description of Federal Loans
Federal vs Private Student Loans
Federal Student Aid Guide to Repaying Federal Loans
Federal Student Aid Overview of Income-driven Repayment
Federal Student Aid Overview of Repayment Plans
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by Repayable | May 15, 2017 | Getting started, Money Matters
Read this if you’re panicking about making student loan payments and you are looking for temporary relief from student loan debt payments.
Estimated read time ~5 minutes.
Student loan deferment or forbearance can give you temporary relief from the financial stress of student loan payments. Here’s what you need to know to decide if these options are right for you.
Deferment
Deferment allows you to temporarily stop making payments on your student loans. While in deferment the federal government pays the interest accruing on your subsidized federal loans. That means you don’t earn interest or compounding interest on those loans during your period of deferment.
In order to be eligible for deferment borrowers must meet specific criteria. You can find the comprehensive list and forms for each type of deferment here. In a nutshell you’re eligible if you’re still enrolled in school half-time, if you’re in grad school or fellowship, if you’re unemployed, if you’re experiencing economic hardship or in the peace corps, if you’re currently or were recently on active military duty for war, military operation, or national emergency.
Deferment is the ideal choice because you will never have to pay for interest accrued on subsidized loans during the period of your deferment. You can find the
Forbearance
Forbearance allows you to temporarily stop making payments on your student loans. While in forbearance interest continues to accrue and compound on all types of loans including subsidized.
There are two types of forbearance, general and mandatory. Forbearances aren’t granted for longer than 12 months so if you are still experiencing hardship or are eligible for mandatory forbearance after that you will need to re-request forbearance.
General forbearance is at the discretion of your loan servicer and can be granted for reasons such as financial difficulty, medical expenses, employer change, and other reasons suitable to your lender.
Mandatory forbearance is required to be granted by your loan servicer if you meet eligibility requirements. These requirements can be medical or other health-professional residency, total monthly amount of student loan payment is 20% or more of your gross monthly income, some teaching and americorps positions, some military and national guard situations
You can find the general forbearance request here.
Alternative repayment plans.
Do you really need to stop making payments on your student loans or is there other room in your budget to make sacrifices? Take a calm look at your finances and find out if a lower payment is really what you need rather than no payment. You can accrue a significant amount of interest in forbearance. Let’s look at 12 months forbearance on a $36,000 loan with 4.8% interest. Your loan balance after 12 months forbearance will be $37,728. That’s an extra $1,728 you now owe and 4.8% relative increase in the cost of your education. Choose wisely, income-based payments also allow you to work toward eventual loan forgiveness after 20-25 years of payments.
Let me know what your biggest fears are about student loan repayment in the comments below, on the Repayable Facebook Page, or by sending me an email jeni@repayable.org. I’m here to help. With the information you need, you can make your student loans truly repayable.
Additional Resources:
Deferment and Forbearance
Deferment Eligibility
Forbearance Request Form
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by Repayable | May 1, 2017 | Getting started
Read this article if you’re worried about being able to afford student loan payments and think you might default. Estimated read time ~10 minutes.
If you’ve come to this article you might be uncertain of your financial future. Maybe you can’t find a job, maybe you had unexpected medical expenses, or maybe you overextended yourself when borrowing for college and now are facing down repayment. Whatever brings you to this article take a deep breath, you have options.
Repayable is all about finding the best way for you to repay your student loans. That starts with keeping you in good standing, which means making your payments on time. Your student loans are in default when you’ve failed to make a payment for 270 days if you pay monthly, or 330 days for FFEL loan programs.
Step 1: Contact Your Loan Servicer
The first thing to do is contact your loan servicer to discuss your options. Your loan servicer can help you find the payment plan that makes the most sense for you.
Step 2: Review Your Options
There are a two strategies to help you manage your student loan debt during times of financial hardship. Deferment and forbearance allow you to delay making payments for a period of time. In deferment you don’t make any monthly payments and you don’t accumulate interest on subsidized loans. In forbearance you don’t make any monthly payments but you do accumulate interest on all loans.
The next strategy involves choosing an income-driven repayment plan. Income-driven repayment plans include: Revised Pay as You Earn (REPAYE), Pay as You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Each plan is slightly different but involve paying 10-20% of your discretionary income and forgiveness of the remaining balance after 20-25 years. Your monthly payment can be very low so may be a better option than deferment or forbearance because you can work toward loan forgiveness.
Step 3: Choose the Strategy That’s Best For You
Picking the strategy that’s best for you isn’t as overwhelming as you might think. You may even be able to enlist the help of the financial aid office of your college.
Step 4: Avoid Common Pitfalls
Don’t be so overwhelmed that you choose to ignore the problem until you’re in default. Default can keep you from loan forgiveness eligibility and ruin your credit. If your student loans aren’t in good standing you could also lose the professional license you earned with your college degree.
Don’t enroll half-time to avoid having to make payments. Your debt is compounding but you might not be earning yourself a higher paying job after the completion of the courses. You’re better off seeking deferment or forbearance or switching to an income-driven repayment plan.
Unlike other types of consumer debt, student loan debt can’t be discharged in bankruptcy. You will have to deal with your student loans one way or another. The easiest way to do that is to start looking at your options at the first sign of trouble. Don’t let your fear of criticism or the unknown keep you from repaying your student loans
What’s your biggest struggle with repayment? Let me know in the comments below or on the Repayable Facebook Page. You can always send me an email jeni@repayable.org and I’ll help you out!
Additional Resources:
Understanding Default
Deferment and Forbearance
Avoiding Default
Income-Driven Plans
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