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How to handle the student loan repayments

by Tracy Latona |

Just over 3 years ago, the federal government put a temporary pause on student loan payments and paused interest. The deadline for repayment kept getting pushed back…nine times to be exact. Now, with the debt ceiling deal reached, over 45.3 million borrowers have to feel pain they haven’t felt in three years. Borrowers are scrambling to find a way to pay, and stressed.

What if it didn’t have to be that way?

August 29th marks the deadline for student loans to kick back in. After 3 years on pause, it’s easy to understand that borrowers have adapted to NOT paying them, or graduated in 2020 (or after) and have never HAD to pay them.

The average borrower of student loans carries a $37,000 balance if they have federal loans, and an average of $55,000 if they have private loans. 92% of borrowers have federal loans that have been on pause. To add to this, there is no sign of Biden’s student loan forgiveness actually following through. So, how do you handle student loan repayments starting back up? How do you prepare to shell out an average of $363/ month if you have a $35,000 loan?

  1. Go to www.studentaid.gov, and update your info. You will see who now owns your loans (Remember, Navient got out of the federal student loan business and sold off their loans), and be able to sign up for auto-pay. If you had auto-pay before, you will need to re-sign up for that again. PLEASE don’t miss a payment because this is how it was done before!
    2.Call your student loan servicers. Like, now. The sooner you can get on the phone, the less likely you will have to endure long wait times. Ask them what your current balance is, what your interest rate is, and what your estimated monthly payment will be.
  2. Consider refinancing or consolidating. Refinancing only makes sense if you’re going with a lower interest rate, and NOT extending the time you are in debt. If you go this route, make sure your payment timeline stays the same. Consolidation rolls all your payments into one lump sum, with an averaged out interest rate. This can be done only ONCE for federal loans, so be sure you’re at peace with the interest rate and terms. Otherwise, use the debt snowball method for your separate loans.
  3. Please, stay away from Public Student Loan Forgiveness programs. Only about 2% of people actually get their loans forgiven this way, and you have very stringent rules to follow. Often, you’re stuck in a job that doesn’t pay as much (non-profit or federal jobs). Would you rather make more and be in control of your career, or HOPE you get your loans forgiven by the government that can’t control its own finances? Income repayment plans should be an absolute last resort, as often the minimum payments don’t even cover the interest. I had a conversation with a 70 year old lady who had about $190,000 in student loan debt. She was on an income driven repayment plan, and her interest kept racking up and compounding, because her minimum payment wasn’t enough.
  4. Please, please, please, if you’re not already doing this, make a mission for your money (aka, do a budget) and assign a mission to every dollar that you earn. Track your expenses to make sure your soldiers (or dollars) are following that mission. If you’d like help with this or have questions, please reach out to me.

Lastly, yes, you do have to repay your loans. The federal government will get its money one way or another, whether that be through taking your tax refund, docking your pay by up to 15%, or from your social security. Paying off your debt = financial freedom! Financial freedom = choices. Choices = living the life you choose, and not having decisions made for you.

Tracy Latona
Golden Rose Financial Coaching
(502) 665-1127