How to keep paying your student loan at $ 0
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However, once the suspension is lifted, a $ 0 payment may still be a necessity for some borrowers.
According to an October 2020 NerdWallet survey conducted by The Harris Poll, 45% of Americans with their own federal student loans were not confident that they could afford their loan payments if the payment freeze ends last December.
Hopefully the borrowers will be better off financially by September. However, if you continue to have to pay less, you have the following options.
Sign up for the earnings-based repayment
For a manageable payment, start with one Income-based repayment plan.
“Look at the income-based repayment first because it has the most perks,” said Persis Yu, director of the student loan aid project for the National Consumer Law Center not-for-profit.
These benefits can include forgiveness after 20 or 25 years of payments, partial interest subsidies, and monthly bills as low as $ 0.
Payments are based on adjusted gross income, family size, and federal poverty guidelines. For example, if you have an AGI of $ 19,000, are single, and live in the bottom 48 states, most income-based plans pay $ 0 for 12 months.
If you are already on one of these plans and your income has decreased, so have your payments.
“It’s important for borrowers to realize that they can apply for recertification of their plans at any time,” says Yu.
You can make payments under various income-oriented plans with the Department of Education loan simulator.
Defer payments for student loans
Federal student loan payments can be paused through deferral and forbearance.
The delay is linked to events such as losing your job or being treated for cancer. If eligible, this option can leave payments of $ 0.
For example a Postponing unemployment is possible if you work less than 30 hours a week. If your hours have been cut but your household’s income is too high for an income-based plan, it may make sense to defer it.
The state also pays all interest on subsidized loans during the deferral.
“There are some subsidies for income-oriented plans, but they’re more generous with a delay,” said Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit that offers free advice to borrowers.
The deferral is often possible for up to three years, but you will have to submit a new application on a regular basis. If unemployment is postponed, the duration is every six months.
Payments are currently suspended interest-free through a special administrative debt. When that pause ends, your servicer will be able to give you some discretionary indulgence, possibly without any paperwork.
But apart from no bills, there are few benefits to this kind of forbearance.
“Forbearance is the last resort,” says Mayotte. “Either that or you will default or insolvent.”
Interest usually accrues during the deferral. When it ends, that interest can be added to the amount you owe, meaning future interest will grow on a larger balance.
With any EUR 0 payment strategy, it is possible that you will repay more overall.
“If you can afford it, I would always recommend paying or not paying,” Mayotte says.
The most important thing you need to do now is understand your options, says Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit that represents student loan administrators.
In part, that’s because service providers can’t change your payments just yet.
“It’s a matter of regulation and process,” says Buchanan. “We can’t really put you on (a) plan at the moment because you’re not making any repayment.”
But you can do the following:
- Check your details. Log in to your service provider’s website to check your contact information and the payment amount. If you’re not sure who your servicer is, visit the Bundesstudienhilfe website. Mayotte says one should beware of companies getting in touch and offering help for a fee; Your servicer will never charge you.
- Collect paperwork. Applications may require documents such as pay slips, which Buchanan says must be from the last three or four months when you submit your forms. If you apply now, you will likely need to do it again with more current information. But you can get a head start by figuring out what you need and filling in everything you can.
- Set a reminder. With payments expected to resume in October, you should submit your applications later this summer.
“If you wait until the day before your due date in the month when 30 million people have to pay back,” says Buchanan, “the call times will be long.”
This article was written by NerdWallet and was originally published by The Associated Press.
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Ryan Lane writes for NerdWallet. Email: [email protected]
The article How to Keep Paying Your Student Loan At $ 0 originally appeared on NerdWallet.
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