I was working as a financial journalist and just like millions of other Americans; the recession hit me badly in the year 2009. I was laid off from my job. To ride out this recession period, I decided to pursue MBA, later I found myself in this huge six-figure student loan debt.
Unfortunately, after my graduation, the economy was still stumbling and even after the advanced degree, I was unable to find a good job for me. On top of it, my credit score was in a drain and the worst part I was having thousands of dollars in medical debt.
With my professional knowledge, I was able to dig up some really good solutions for this massive debt problem. I manage to tackle down my loans with some refinancing tactics.
Well “when time gets hard, you should go harder” that is what I did. Today, I have achieved this debt-free life and I’m working as an executive editor.
Time needed: 4 minutes.
Either you are scarcely scraping or want to pay less than you owe, there is always a hope to get those payment lowered. I have mentioned some of them below:
- Extend your repayment Plan
You all must be aware that when you graduated, you we re enrolled in the standard repayment plan, which is the evade plan for the federal borrowers, and in this plan, you’ve to pay off your loan in 10 years. Well,this is not the only option for you.
To lower your payment, one way is to opt for the extended payment plan. This plan allows you to pay off your loans up to 25 years. As you get more time to pay, the amount you have to give extends every month.
This option is available only for the federal student loan borrowers and with this, you can have amazing benefits on any direct or federal family education loans.
Everything comes with a price, and here it is a drawback.The longer you take to pay your loan, the more interest will be there. It’s important to clear your consciousness and ask whether it’s worth to extend your repayment plan.
- Choose a graduated payment plan
If you believe that in coming years your income will increase, then a graduated repayment plan might let you breathe in the fresh air.
Unlike the variation of the payments in the extended payment plan, this plan starts off with monthly payments that will increase slowly. As you know, most of the federal loans require a period of 10 years to pay off the loan.
If you consolidate your student loans through the Department of Education, you can get 10 – 30 years to disburse the consolidated loan,however, it depends on how much you owe.
- Opt for an income-driven repayment plan
There are four available income-driven repayment plans: pay as you earn (PAYE), revised pay as you earn (REPAYE), income-based repayment,and income-contingent repayment. These plans can limit your monthly payment as a proportion of your discretionary earnings.
And you might not believe that in case your earnings drop down to an extremely low level or you’re still unemployed, then your payments might turn zero.
After the repayment period is over, these plans forgive any remaining balance so that the borrowers must pay the taxes on the forgiven period as it is discharged.
- Consolidate your Loans
If you have several federal student loans with different repayment terms, interest rates, and payment due dates, you need to opt for the direct consolidation loan, as this is a suitable way to roll out all the loans into one. Note that the borrowers with balances beyond $60,000 might extend their loan up to 30 years.
However, consolidating requires enrolling into certain terms and conditions as well as repayment and forgiveness programs, including the ones I have mentioned above. But, if you’re not willing to pursue one of these repayment and forgiveness programs, you can simply consolidate and extend the reimbursement period beyond 10 years. This is one of the other ways to see the lower payments.
Remember, the federal consolidation won’t save you any money. With this, you will not only pay more interest but also the interest rate you pay on this loan will be average on your old loans. Again, it’s your call – more cash now or savings on the whole.
- Refinance at a lower interest rate
The borrowers who took out private loans, they are left with few options, and one of them is student loan refinancing.
This process involves taking a new loan from a private lender and using that money to pay off your previous loans. The main aim is to achieve good terms with new loans, like different reimbursement terms and low-interest rates.
You must keep in mind that with private loans, you have to pay what you owe.
However, you can refinance the private and federal loans,but generally, it is imprudent to refinance the federal loans. This is because refinancing with private lenders lay off your federal protections.
The private loans are not under any provision to protect the borrower from unemployment or any financial crises.
You should not be under the surveillance of the student loan debt
At some point in time, most of us face situations that we can’t control. Just like the recession or the layoff, they are beyond our control.
But all we need is to say determined and dedicated. I rebuilt my life and honestly I felt empowered than ever before.
I analyzed all of this and understood how to find out the best possible solution to find out my way through this debt maze. This all is the game, and the only thing we need to check is what the odds here are. If you know your tools, it’s an easy game to win and on the top, you can learn a lot from it