Student loan debt now impacts more than 43 million Americans, so it shouldn't be surprising that loan counselors are busier than ever.
According to a recent New York Federal Reserve report, U.S. student loan debt has surpassed $1.3 trillion and continues to grow. The average 2016 college graduate has $37,172 in student loan debt, up six percent from last year.
If you're feeling the stress from your student loans, or if you're confused about your repayment and deferment options, here's a brief look at a few of the basics with help from our financial wellness partner, GreenPath.
Federal Repayment Programs
Most student loans are funded by the U.S. government. These loans, called federal student loans, offer some flexibility in how they are repaid. Some of the most common federal loan repayment options include:
Standard Repayment - You pay a fixed monthly amount and pay off the loan in 10 years (or less). You pay the least amount of interest with this repayment plan.
Graduated Repayment - Starts with a lower monthly payment amount and then gradually increases the payment amount every two years. Like standard repayment, the repayment period is up to 10 years. However, you'll pay more interest over the life of the loan.
Extended Repayment - Stretches loan payments up to 25 years. This lowers the monthly payment but increases the total paid in interest. Total student loan debt must be more than $30,000.
Income-Based Repayment (IBR) - Monthly payment amount is recalculated each year, based on income and family size. Can lower monthly payment amounts, which are capped at 10 to 15% of discretionary income. Increases total interest paid, but remaining loan balance will be forgiven after 20-25 years of qualifying loan repayments. Estimate monthly payments using the government's Income-Based Repayment calculator.
Public Service Loan Forgiveness (PSLF) - Program for borrowers who work in certain kinds of "public service" jobs, including jobs in government and non-profit organizations. Remaining loan balance is forgiven after 10 years of eligible employment and qualifying loan payments. Can be used with the Income-Based Repayment (IBR) plan to help keep loan payments affordable.
Pay As You Earn (PAYE)/Revised Pay As You Earn (REPAYE) - Similar to IBR, the monthly payment amount is recalculated each year based on income and family size. Usually features the lowest monthly payment amount - no more than 10 percent of discretionary income. Increases total interest paid, but remaining loan balance will be forgiven after 20-25 years of qualifying loan payments. Use the government's "Pay As You Earn" calculator to see if you qualify for the "Pay As You Earn" repayment program.
Deferment or forbearance lets you temporarily suspend making your student loan payments. However, this is typically not your best loan repayment option. Unless you have subsidized loans, interest charges will continue to accrue and the size of the loan will continue to grow during the deferment period.
Education Deferment - As long as you are attending school at least half-time, payments on the loan can be deferred until after you leave school. Usually, loan payments will resume six months after half-time enrollment ceases.
Economic Deferment - You may qualify for an economic deferment if you are experiencing economic hardship due to low income.
Unemployment Deferment - If you can't find a job, you may be eligible for an unemployment deferment for up to three years after you get out of school.
Disability/Rehabilitation Deferment - You may qualify for a loan deferment if you're unable to work due to an injury or illness, if youre caring for a dependent or spouse that is disabled, or if you're undergoing rehabilitation for injury or illness.
Family Leave Deferment - A parental or family leave deferment may be available if you can't work or attend school because you're pregnant or caring for a newborn or a newly adopted child.
Military Deferment - You may be eligible if you're on active duty as a member of the armed forces or serving full-time in the National Guard or Reserve
Need expert assistance with your student loan options? Telcoe Federal Credit Union is proud to partner with GreenPath, our financial wellness partner, and their counseling services at Accel. Their student loan experts are ready to assist our members in understanding their student loans, exploring repayment options, and dealing with student loan services. For more information, click HERE.
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