When it comes to Federal Student Loans, borrowers have options even they are in default. Below are a few examples of how borrowers can take control over their Federal Student Loans. The names and number are made up. The results are very real.
Bob has $60,000 in Federal Student Loan debt. He defaulted on his loans but wanted to get out of default and handle his loans. He is a teacher earning $45,000 and heard about Public Service Loan Forgiveness (PSLF) but wasn’t sure what it all really meant. Bob got out of default by consolidating his loans and is now making payments that qualify for PSLF. Under the Standard Repayment Plan, Bob was paying $690 per month (which he couldn’t afford) but under his consolidation and REPAYE plan, he pays only $225 and will only have to pay for 10-years so long as he teaches for those 10 years. Not only does Bob save $465 per month, but by making qualifying payments under PSLF, Bob’s loan will be forgiven after making 120 PSLF qualifying payments. That’s a potential tax free forgiveness of $60,000.
Mary is a divorced woman working as a retail manager. She earns $55,000 a year and supports 2 children. Her Federal Student Loan balance is also $55,000. The minimum payment is over $600. She called her servicer who told her she could extend the term of payment to 25 years, but that only drops her payment to just over $300. While that’s a 50% savings, it still wasn’t affordable for Mary. Then Mary learned about REPAYE. With REPAYE, Mary’s payment is only $200 a month. If Mary can’t pay off the balance within 20 years, anything she still owes will be forgiven.
Paul is retired. While he made good money while he was employed, the foreclosure meltdown a decade ago nearly drained his retirement account. Worse, Paul has several Parent PLUS loans he took out for his children, with a balance over $100,000. Even with an extended 25-year term, the minimum payment is over $800 a month. Paul cannot afford that with his limited retirement income. By consolidating his loan, he became eligible for the Income Contingent Repayment Plan. Based on Paul’s income, he now only pays just $215 a month. He only has to pay for 25 years. Anything not paid after 25 years is forgiven. If Paul passes before 25 years, the loan is written off with no taxability to his estate.
These are just a few examples of how understanding your options and knowing what to do can help you obtain an affordable repyament for your Federal Student Loans. In theory, this should be easy. In reality, it is not. That’s why we built StudentLoanify. We are here to educate you and help you take action – quickly and easily.