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Plan Well, Retire Well

Saving and investing your money
CoverPhoto LoveYourLoan 2016

Student Loan Repayment… You have options!


Yesterday my colleagues and I completed our third webinar about student loan repayment in the last three years. I thought it be helpful to include some of the important tips we covered during our webinar. Especially for those who have young adults who are going off to college soon, are in college or are currently in repayment. If you'd like to watch the entirety of the webinar called "Love your Loan: Student Loan Repayment" it can be found here!

You have options when it comes to repayment

When working with a financial planner, they ask that they meet with you once a year to reevaluate where you're headed. This can include goals, updates to your plan and life changes. Most people don't actually choose a repayment plan when they start repayment, so the standard 10-year repayment option is chosen for them. While it may work out in most cases, this repayment plan doesn't work for everyone. Life happens and while paying $300/month on your loans WAS working, now it's too much.

You can ALWAYS change your repayment plan at any time. There are over eight different plans that can work for you and your lifestyle. To check out the different repayment plans, go here. While researching the repayment plans for this year's webinar, I realized that maybe one of the income contingent plans would work better for our lifestyle. I'm currently on a graduated extended repayment (I have a lot of student loans) and if we had to pay the standard repayment, we'd have no money.

To consolidate or not to consolidate, that is the question

There are pros and cons to anything in life, including consolidation. Some good things about consolidation are that you'll have one monthly payment, that MIGHT be lower. There are no fees associations with a Direct Consolidation Loan as well! Some bad things might be that you may lose access to federal repayment plans (like the income contingent ones mentioned earlier) and student loan forgiveness. Repayment may also be extended up to 30 years!! You can only consolidate once with direct consolidation, unless you add new loans. (Meaning you went back to school and now have MORE loans!) One thing to note for both a pro and a con is that the interest rate will be fixed for the life of the loan, based on a weighted average of all of your loans. It won't exceed 8.25 percent, but if you have a loan that is more than 8.25 percent, consider keeping it out of consolidation. For more information on loan consolidation, check out this resource.

What if I can't pay my student loans?

We never know what will happen in life. You may have a job loss, death of a loved one or spouse that affects how you live. Thankfully, we have two ways to help with your student loans. Deferment or forbearance. First things first though, you MUST APPLY for either deferment or forbearance AND you must continue to make FULL payments otherwise your application will be rejected. If trouble lies ahead, don't delay. Take care of this quickly!!

Deferment is a period of time where your principle and interest of your loan is delayed and you don't need to make payments while in deferment. There are quite a few reasons why someone might apply for deferment, the biggest reason for most is that they are back in school. Other reasons may include if you have an economic hardship, are unemployed or in active duty. Deferment can last from six months up to three years depending on your situation.

Forbearance is for those who don't qualify for deferment. There are two types of forbearance: mandatory and discretionary. Both have qualifications for which one you'll be in, and only can last up to 1 year. For more information on both deferment and forbearance go here.

Student loans can be one tricky topic, especially if you or someone you know is struggling with repayment. Know that you have options to change your repayment to one that may suit your lifestyle. We all know about loan consolidation, but there may be instances where it might not be best for you. If you can't pay your loans, don't wait, apply for deferment or forbearance right away and continue making your payments in full until you have been accepted. We covered a ton of information in our one-hour webinar, so if you have questions or would like to learn more, please check it out! Love your Loan: Student Loan Repayment.



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