Overview of Your Student Loan Debt Options
Student Loan Debt Help
With the ever-rising cost of higher education, many former, current, and future students have questions about financing education. This post will help you learn your options for repayment of federal student loans.
For federal student loans, there are several repayment options. The default is a 10-year plan: your monthly payments are calculated at whatever will pay your balance to zero after 10 years of payments. However, this option is not always the best choice, especially for the recent graduate.
First, you can change the number of years and calculate your payments that way (for example, 15-year repayment). But the most useful, is the income-based repayment option. Under this option, you let your servicer know how much you earn, and it calculates your monthly payments at 10-15% of your income (the percentage depends on when you took out your loans, but these payments will never be more than your 10-year plan amount). If you are on income-based repayment for either 20 or 25 years (again, it depends on when you were taking out loans) and you make all of your payments, the rest of your debt is forgiven. However, this forgiveness is a taxable event, which means the amount of debt that is forgiven by the federal government will show up as income on your taxes that year.
Another important option to note is the public service option. If you spend 10 years (they don't have to be consecutive) working in eligible jobs (non-profit, government, etc), while making your income-based payments, your debt is forgiven. However, this will NOT be a taxable event; the forgiven amount will be free and clear.
After considering these repayment options, you may also consider things like consolidation or paying a little extra each month, especially if you have a combination of federal and non-federal loans. However, when making these decisions, you will need to ask your servicers how thing like interest rates, prepayment penalties, and repayment options will be affected by any changes you make.
Please be sure to contact us with any questions regarding your student loan debt and we will be glad to help you.