by Repayable | Jun 12, 2018 | Ask Jeni
Ask Jeni is brought to you in partnership with tuition.io, a company dedicated to helping the best companies free their employees from student loan debt.
How do I pick the right student loan for graduate courses? What are the benefits of a Direct PLUS federal loan vs a private loan such as Sallie Mae?
If you have access to federal student loans they are almost always your best bet. Here’s why.
- Typically federal student loans, including Direct PLUS loans, have a lower fixed interest rate than private student loans.
- Federal Direct loans are also eligible for loan forgiveness but private student loans aren’t eligible.
- Federal student loans also have the most flexibility during repayment, there are income-driven plans and options to defer payments. Private student loans have less repayment flexibility.
Federal student loans have numerous repayment options, are eligible for loan forgiveness, and typically have lower fixed interest rates than private student loans. If you have access to enough Direct PLUS loans to cover the cost of your graduate courses, pick those over private student loans. If you don’t quite have enough money in Direct PLUS loans, borrow the Direct PLUS loans first then carefully borrow the amount you still need to cover your courses from a private lender.
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by Repayable | Jun 6, 2018 | Mindset, Think Pieces
Getting out of student loan debt is a long term goal. It’s no easy feat to wipe out tens of thousands of dollars in education-related debt. For most of us, becoming student loan debt free is an undertaking that takes years to accomplish. Today’s post is going to talk about the totally normal waxing and waning of motivation that happens when you decide to tackle your student loan debt.
Read this if you want a fresh perspective on why your motivation for repaying student loan debt cycles. Estimated read time ~5 minutes. 1.5 x watch time ~4 min.
To describe the changes in motivation that happen throughout student loan debt repayment I’m going to use the trans-theoretical model, better known as the stages of change. This model is commonly applied to behavioral changes such as beating addiction or making another health-related lifestyle change. The stages of change also apply to tackling your student loan debt.
Stage 1. Pre-contemplation
Borrowers in this stage are not thinking seriously about repaying their student loans and tend to defend their current lack of concern. Many don’t see student loan debt as a big deal. The benefits of borrowing money outweigh the adverse consequences so they are happy to continue borrowing.
This is the stage most actively enrolled college students are in. Students need money to pay for their education so they continue to borrow and spare themselves from worrying about the long term impact of repaying the loans until a future time.
Stage 2. Contemplation
Borrowers in this stage are able to consider the idea that they can do something about their student loan debt but feel ambivalent about taking the next step. On the one hand their student loans gave them the education they needed, and ignoring repayment may give them more money to spend each month. On the other hand, they are starting to experience some adverse consequences like wage garnishment, offset tax returns, and collection calls if in default or rapidly accumulating interest, failure to pay down principal, or not enough cash flow if in the wrong repayment plan.
This is the stage many recent graduates are in and this is often the stage many defaulted borrowers are in. The consequences of student loan debt are starting to surface and come to a borrowers attention.
Stage 3. Preparation
Borrowers in this stage have usually made a recent attempt to figure out what to do about their student loan debt. Borrowers are less ambivalent about taking the next step because they see the cons of doing nothing are starting to outweigh the pros. They are usually taking some small steps towards changing their repayment approach. They believe that change is necessary and that the time for change is imminent. Equally, some people at this stage decide not to do anything about their current repayment strategy.
When borrowers reach out to me with an email, this is typically the stage of change they’re in. Borrowers in this stage have often done some reading online or perhaps unsuccessfully contacted their loan servicer to figure out what their best student loan repayment strategy is. This stage can happen at any time for a borrower.
Stage 4. Action
Borrowers in this stage are actively taking steps to change their repayment strategy and making big steps towards significant change. Ambivalence is still very likely at this stage. There is a great risk of “relapse” in this stage because borrowers are likely to encounter several difficulties and a lack of information.
Borrowers in this stage are calling their loan servicers, completing necessary applications, and actively making adjustments to their repayment strategy. This stage happens after borrowers have reached a decision about their student loan repayment strategy.
Stage 5. Maintenance
Borrowers in this stage have successfully changed their repayment strategy and are continuing to keep up with maintenance paperwork (such as annual income certification) and are making on time monthly payments. These borrowers have learned to anticipate expenses and have developed effective financial strategies to stay on track. Borrowers may lose sight of their goal temporarily, but don’t tend to see this as failure.
The Cycle of Motivation
During the long process of repaying student loan debt, some borrowers will experience default, or relapse. Relapses can teach important lessons and strengthen a borrower’s resolve to get out of debt for good. The drawback is that relapses can also trigger a borrower to give up on their quest for a #debtfreedream. The key to recovering from a relapse is to review the repayment process up to that point, identify strengths and weaknesses, and develop a plan to resolve those weaknesses to solve similar problems the next time they occur.
Relapse is a factor in the action or maintenance stages. When it comes to substance abuse and lifestyle change, research clearly shows that relapse is the rule rather than the exception. If you’re struggling and need a little help you can always DM @therepayable on Instagram or send me an email jeni@repayable.org
A lapse is different from a relapse. A lapse is a slip up with a quick return to your maintenance repayment strategy whereas a relapse is a full-blown default. For borrowers a lapse might mean you splurged financially somewhere and failed to keep your goal of making an extra student loan payment. But you’re still on track to pay off your student loans. For borrowers counting on PSLF a lapse would be failing to re-submit your annual income certification on time and letting your income driven repayment plan change back to a standard repayment plan. You’ll pay more money than you needed to before getting loan forgiveness but you’re not ineligible because of it.
I hope this article gave you some language to think about your student loan debt and any potential slip-ups you’ve made. I would love to know what stage you’re in, let me know in the comments below or on the Repayable Facebook Page.
Next week’s post will share a few strategies you can use to move yourself forward from one stage to the next and talk about my journey through the stages of change.
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by Repayable | May 30, 2018 | Getting started
Are you ready to change up your federal student loan repayment plan? If so, today’s post is for you. This three step walk through will help you switch to a student loan repayment plan that works for you.
Estimated read time ~3 minutes.
Step 1 Choose Your Repayment Plan
Before you call anyone, it’s worth your time to figure out what repayment plan works the best for you. Loan servicers can help but it’s better and will speed up the process if you already know what you want. Last week’s post is all about helping you decide so check it out here and come back.
- If you’re considering loan forgiveness or having trouble making your payments one of the income-driven plans is for you.
- If you want to pay debt down quickly the 10 year standard or refinancing to private loans for a lower interest rate are your best options.
- If you want to simplify many individual loans into one loan and haven’t made any eligible payments toward loan forgiveness, consolidation might be right for you.
Step 2 Contact Your Loan Servicer
If you don’t know who your loan servicer is you can log in to the National Student Loan Data System (NSLDS) page and it will show how much you owe and who you owe it to. The information in this system can take up to 120 days to update so keep in mind that it may not show all loans if you’re still borrowing.
When you contact your loan servicer let them know which plan you’re interested in and they will help you switch plans. Remember, your servicer has a responsibility to help you switch repayment plans, it’s part of servicing federal student loans.
Step 3 Submit Any Necessary Paperwork
If you’re looking to switch to an income-driven repayment plan you’ll need to submit an application for income-driven repayment. The application uses your income information to determine your monthly payment. You can find the application here, it takes less than 10 minutes to complete.
If you’re hoping to consolidate your student loans there’s an application for that too. You can find that application here, it takes less than 10 minutes to complete.
A note about fees. There are no fees to change repayment plans or consolidate your loans. Anyone that charges you a fee is a scam, work with your loan servicer directly.
If you’ve changed your student loan repayment plan did it take you as long as you thought? Let me know in the comments below or on the Repayable Facebook Page.
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by Repayable | May 23, 2018 | Getting started
Repayment flexibility is one of the biggest benefits of federal student loans. All that flexibility means there are a ton of student loan repayment plan options to choose from. You want to pick the smartest plan that helps you reach your student loan repayment goals but it can be confusing to choose.
Today’s post compares the federal repayment plans and lays the framework for decision-making. After you’ve read this you will be able to choose the right student loan repayment plan based on your specific financial circumstances and goals.
Estimated read time ~10 minutes.
A Breakdown of Repayment Plans
| Plan |
Qualifies for Loan Forgiveness |
Payments Based on Income |
Interest |
Maximum Duration of Repayment |
| Standard |
No |
No |
You will pay the least interest under this plan |
10 years
10-30 years if consolidation loan |
| Graduated |
No |
No, but payments increase over time to repay total over 10 years |
You will pay more interest than a 10 yr standard |
10 years
10-30 years if consolidation loan |
| Extended |
No |
No, but payments can increase over time to ensure total repaid in 25 years |
You will pay more interest than any plan with a shorter repayment term |
25 years |
| REPAYE |
Yes |
10% of discretionary income |
You will pay more interest than any plan with a shorter repayment term |
20 years until forgiveness if only undergraduate loans, 25 years if graduate loans |
| PAYE |
Yes |
10% of discretionary income but never more than 10 year standard |
You will pay more interest than any plan with a shorter repayment term |
20 years until forgiveness |
| IBR |
Yes |
10 or 15 % of discretionary income but never more than 10 year standard |
You will pay more interest than any plan with a shorter repayment term |
20 or 25 years until forgiveness depending on when you received your loans |
| ICR |
Yes |
20% of discretionary income or a 12 year standard payment adjusted for income, whichever is less |
You will pay more interest than any plan with a shorter repayment term |
25 years until forgiveness |
| Income Sensitive Repayment |
No, plan is only for FFEL loans which aren’t eligible for forgiveness |
Based on monthly income but will repay total in 15 years |
You will pay more interest than any plan with a shorter repayment term |
15 years |
Target Borrowers for Each Plan
Standard: Borrowers with low debt to income ratio are ideal candidates because the required monthly payments won’t eat up all the money needed for monthly cost of living.
Graduated: Borrowers who know their initial income will be low and that it will increase substantially with time.
Extended: Borrowers with > $30,000 in student loan debt and high debt to income ratios who aren’t looking for loan forgiveness.
REPAYE: Borrowers with a high debt to income ratio who are unable to afford payments under other plan types and would benefit from forgiveness of the loan balance after 20-25 years of making payments or those who are seeking PSLF.
PAYE: New borrowers on or after Oct 1st 2007 with a high debt to income ratio looking for loan forgiveness through PSLF or income-driven loan forgiveness after 20 years.
IBR: Borrowers seeking PSLF or income-driven loan forgiveness with a high debt to income ratio who are unable to afford payments under other plan types.
ICR: This plan is eligible for PSLF however the monthly payment is typically higher than other income-driven repayment plans, so this may not be the best choice for most borrowers. ICR is ideal for a a parent who consolidated a Parent PLUS loan into a Direct Consolidation Loan and is looking to obtain PSLF.
Income sensitive Repayment: A borrower with FFEL loans who is seeking more affordable payments than the 10 year standard plan.
Choosing the Right Student Loan Repayment Plan
Deciding if you’re in the right repayment plan is pretty straightforward once you apply a consistent decision-making framework to your own financial situation. You’ll want to use the information in the chart above and read about the target borrower for each plan type to make your decision.
Here are the questions to ask yourself:
- Are you considering loan forgiveness? If yes, Standard, Graduated, Extended, and Income Sensitive aren’t for you. ICR also isn’t for you unless you’re a parent with a Direct Consolidation Loan.
- How quickly are you trying to get out of debt? If you want to be out of debt quickly, want to minimize interest, and aren’t looking for loan forgiveness the 10 year standard plan is the best federal repayment plan. However, if you have high income and excellent credit you could consider refinancing your student loans. Read about refinancing here.
- Are you seeking maximum affordability of your monthly payment? If you’re considering loan forgiveness or are just looking to pay the least amount of money each month REPAYE, PAYE, and IBR are your best repayment plan options. You will pay the most interest under these plans. If you obtain income-driven loan forgiveness after 20-25 years you will have to pay taxes on the amount of student loan debt forgiven.
Your next steps.
Alright what do you think of your repayment plan? Are you in the right one or do you need to make a change? Next week’s post will be all about how to change your repayment plan if you’re not in the right one. In the meantime, do yo have questions? Hit me up in the DM’s of the Repayable Facebook Page, Insta or Twitter (@therepayable), or send me an email jeni@repayable.org I’m happy to help!
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by Repayable | May 22, 2018 | Ask Jeni
Ask Jeni is brought to you in partnership with tuition.io, a company dedicated to helping the best companies free their employees from student loan debt.
I’ve been looking at debt reduction companies and wondered about pursuing someone to fight for my loans. I did some research and was not confident to invest in them and not sure if it works. What are your thoughts?
I get a lot of questions about hiring a debt reduction company (or a lawyer for that matter) to attempt to negotiate a reduced payment on student loans.
In general private companies offering to reduce the amount of student loan debt you owe are either:
1. A total scam.
or
2. Not technically a scam but charge you legal fees for unsuccessful attempts to reduce your debt.
Student loan debt is not a particularly negotiable debt, especially federal student loans. For the most part borrowers can’t discharge student loan debt in bankruptcy so there is no incentive for anyone to negotiate. The government can garnish your wages and seize your tax returns to collect their money so there’s nothing driving them to reduce your debt.
I would advise extreme caution in hiring anyone to do any student loan debt reduction work for you.
Here’s an article from the Consumer Finance Protection Bureau about best practices for debt reduction organizations. It’s not specific to negotiating student loan debt but it has a lot of helpful cautions in it. I recommend taking a look at it.
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by Repayable | May 15, 2018 | Ask Jeni
Ask Jeni is brought to you in partnership with tuition.io, a company dedicated to helping the best companies free their employees from student loan debt.
My parents took out a separate loan under their name for my school. How do I add that amount to my current loan? It seems to be easier if it remains under their name, but I still would like to figure out how to consolidate.
Unfortunately a Parent PLUS loan can’t be consolidated with your federal student loans. The loan is owned by your parents and the Department of Education views your parents as responsible for repaying it.
If you want to be responsible for payments there are two options:
1. You can log in to your parent’s loan account and make the monthly payments on this loan. This option doesn’t make you legally responsible for the loan and the loan will remain under your parents name. However, it does allow you to make the loan payments so your parents don’t have to.
2. You can consider refinancing their Parent PLUS loan with a private refinancing company. This option will require that you have a fairly high credit score, a high income, and steady income. It also comes at the expense of losing the option for loan forgiveness and federal student loan benefits. However, this option will transfer ownership of their loan to you. Your name will be on the loan and your parents won’t have any further obligations to repay the loan.
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by Repayable | May 14, 2018 | Getting started
You did it! You’ve graduated college and now you’re making a ton of life transitions. Maybe you’re moving to a new city, starting a new job, moving into a new place. There’s so much exciting change going on, and then there are your student loans. Ugh student loans. What are you going to do with your student loans? Where do you even start?
Today’s post is here to share four things you need to know about your student loans after you graduate. You’re smart, you just graduated college. After reading this and applying it to your student loans, you’ll easily know more than your fellow grads. Estimated read time ~5 minutes.
Figure out what type of student loans you have.
You’ll want to know if you have private student loans, federal student loans, or a mix of both. Federal student loans are loans funded by the U.S. government that have fixed interest rates and come with a standard set of borrower benefits. Private student loans are made by banks and other private lending institutions and often don’t carry the same benefits as federal loans.
One way to find out if you have federal or private loans is by looking at the name of your loans. William D. Ford Direct, FFEL, Stafford, PLUS, Perkins are all the names of Federal student loans. For more ways to find out if your student loan is federal or private you can read How to Figure Out if You Have Federal or Private Student Loans.
Figure out who owns your student loans.
To find out who owns your federal student loans you can log into the National Student Loan Data System (NSLDS) using your PIN. If you’re having trouble navigating this, your financial aid office at the college you just graduated from can help. You can send them an email to get started.
Find out how much student loan debt you owe.
If you want to take charge of your student loan debt you need to know exactly how much money you owe. When you log in to the NSLDS your federal loan amount will be listed. If you have private loans you will need to log in to your private loan servicers website to see your total loan amount, this also works for your federal loans.
For even more ways to find out how much you owe you can read How to Figure out How Much Student Loan Debt You Have
Find out which repayment plan you’re in.
Once you’ve figured out how much you owe and who you’re repaying your student loans through you’ll want to know how you’re set up to repay your student loan. There are many federal student loan repayment plans that could work for you. Next week we’ll talk about how you can decide if your repayment plan is the right one.
Next week we’ll start getting into what you can actually do with your student loan debt by deciding if your repayment plan is right for you. Cheers to starting your student loan repayment journey from a place of informed repayment rather than fear!
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by Repayable | May 8, 2018 | Ask Jeni
Ask Jeni is brought to you in partnership with tuition.io, a company dedicated to helping the best companies free their employees from student loan debt.
I have $245,000 in federal student loans with an interest rate of about 7% and I’ve been repaying under the income-based repayment plan. I’ve recently had a salary bump to $175,000 and expect to get a $100,000 bonus this year. If I keep this income I could pay off my loans in about three years and it seems like refinancing would make a lot of sense. But I’m worried my income might change. Should I stay on IBR and put away all the money I make until I have enough to pay off the whole loan? That way, if I lose my job, I haven’t spent all that money on loans, and could just wait out the IBR term?
This is a great question! Here’s my understanding of your situation: In the past you previously made an lower income that necessitated and income driven repayment plan. That’s the plan you’re making payments under right now. Now, your income has greatly increased and you can afford to repay your student loans more aggressively. You also expect to receive a large bonus this year. You have some uncertainty about the stability of this job and how long you will continue to make this income, and worry you may return to a lower income in the future. So wonder if refinancing is a good option or if you should hedge your bets and let the interest accumulate in case you end up wanting income driven loan forgiveness in 2032-2037.
From your description, you’re making too much money to consider an income-driven repayment plan a smart option. The interest that accrues by making minimal payments is a waste of money at this point. Your income-driven payment is going to increase in response to your higher income and I think it puts more control in your hands if you bet on having a future with higher income.
You have a few options. You can switch to a more aggressive federal repayment plan, you can consider refinancing, or you can do nothing.
I’m not sure what the status of your savings account is. Before aggressively repaying your student loans you will need to have at least three months of expenses saved up, if your job seems unstable I would make that six months. If you don’t have that emergency fund yet, savings should be your first use of your extra monthly income.
Regardless of whether you stick with your income-driven repayment plan or choose a more aggressive federal repayment plan, I suggest you start paying a higher monthly payment right now. Don’t “save up” your extra money to make one big payment, use your extra monthly income right now to pay down your student loans bit by bit. Interest accumulates constantly and on $245,000 it’s a lot of interest. Saving up money for one big payment costs you a lot of money with no financial benefit. It only makes it more difficult to pay off your debt in the future.
When it comes to refinancing, I would be cautious. The fact that you’re concerned about your income being unpredictable leads me to think refinancing isn’t a great choice for you right now. The interest is going to keep killing you but you will be in a much tougher spot if your refinance and your income gets reduced significantly.
If you have separate loans and haven’t consolidated, one option is to consider refinancing only a set dollar amount of your student loans that you can comfortably afford to repay within the next year or so. Refinancing companies buy your loans from your current servicer and you can pick and choose which loans to refinance.
For example if you have a $15K loan and a $12K loan with the highest interest rate and then a ton of other loans you could consider refinancing only those two loans for a total of $27,000 refinanced. You can keep repeating this as you pay them off while you have high-income employment. This option is sort of a compromise between getting slammed with the high federal interest rate and the safety federal loans provide.
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by Repayable | May 8, 2018 | Ask Jeni
Ask Jeni is brought to you in partnership with tuition.io, a company dedicated to helping the best companies free their employees from student loan debt.
How can I have the $100.00 my employer pays towards my student loan go directly to the principal? I make the full monthly payment.
Your best bet is to contact your loan servicer (whoever holds your student loans) directly, either through their website or via phone or email. Let your servicer know that you want all extra payments applied to principal rather than used to pay ahead. Some servicers (like Great Lakes) do this automatically unless a borrower indicates a custom allocation of their extra payment.
Typically, the payment will be applied to any accrued interest since your last payment, then the remainder to principal.
For example, if you made your required monthly payment 5/1 and the employer benefit payment was applied 5/7, your payment would first be applied to the six days of interest that accrued since your monthly payment was made. The remainder of your extra payment would be applied to principal.
Then, next month when you made your monthly payment on 6/1 you would only be paying 25 days of accrued interest before the remainder was applied to principal.
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by Repayable | May 7, 2018 | Getting started
Congratulations on the final countdown to your last set of finals ever!!! You’ve earned a celebration for all your academic achievements! Despite the celebration and pride that comes with graduating, you might have a little bit of nagging anxiety about when you need to start repaying your student loans.
Today’s post will talk about when your loans are “due”, which really means when you need to start making payments. No worries, that huge bill doesn’t come screeching in all at once 🙂 Estimated read time ~3 min.
Federal Student Loans
All your Federal student loans will now accrue (start adding on) interest, including your subsidized loans which didn’t add interest to your balance while you were actively enrolled in school. You will get a six month grace period where you don’t have to make any payments but interest will be adding up during that period.
Your first payment will be due: six months after graduation, unless you apply for a Direct Consolidation Loan, then your first payment will be due 60 days after the loan is disbursed (paid out).
Private Student Loans
Not all private student loans have a grace period so you may have to start making payments immediately. Some lenders offer a six month grace period. You’ll need to contact your private loan servicer to find out when your first student loan payment is due.
Your first payment will be due: zero to six months after graduation. You will need to check with your loan servicer to find out when your first payment is due.
Parent PLUS Loans
Parents are responsible for repaying Parent PLUS loans, the balance isn’t transferred to the child upon graduation. Generally parents are expected to start making payments on the Parent PLUS Loan once it’s fully disbursed (paid out). However, parents may request a deferment while their child is enrolled at least half-time and for an additional six months after their child graduates.
Your first payment will be due: For the parent, as soon as the loan is fully dispersed if deferment isn’t requested or six months after graduation if deferment is requested.
When will you be making your first student loan payment? Let me know in the comments below or on the Repayable Facebook page. If you have any questions or need help feel free to email me jeni@repayable.org on shoot me a DM on instagram @therepayable.
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