Dealing With Student Loans

In order to make a living wage today in the U.S., employees are required to have at least a four-year degree. At the same time, the cost of tuition has been on a continuous rise. So for generations X and beyond, student loan debt makes up a large chunk of their total debt. Four short years at college could potentially take decades to pay off if you’re just making minimum payments.

There is hope, however. There are options to pay off debt quickly, get lower interest rates or in some cases, have the debt forgiven. Here are some of your options to chip away at student loan debt so that you can have a little more breathing room in your budget.

Repayment Plans

You might be assigned a certain amount that you are required to repay when you start to pay your loans, but you don’t necessarily have to stick with this arrangement if you have federal student loans. You can actually change your repayment plan for free at any time. has a Repayment Estimator that can help you see which plans you’re eligible for and what different payment options are out there. Once you’ve investigated your options, you can contact your loan servicer and work out a new repayment plan.

Loan Consolidation

Loan consolidation can be an option for people who have a large amount of student loan debt in several different loans. The benefits of consolidating federal student loans are that you can have just one loan payment each month, and your monthly payment could be lowered, as you can get up to 30 years to repay the loan. There are positive and negative aspects to consolidating loans, so make sure you know all the facts prior to taking action. The original loans you have may come with borrower benefits like loan cancellation benefits, principal rebates or interest rates discounts, and when you consolidate loans you could lose those benefits. Note that federal student loans should not be consolidated with other types of loans, or it could be costly.

Loan Deferment or Forbearance

If you find yourself in a sticky financial situation, rather than simply consolidating loans, it may be more beneficial to consider a short-term solution that will help you while you get back on your feet. Certain federal loans may qualify for deferment under special circumstances. Deferment allows you to not make payments, and in some cases not pay interest for that time, on your federal loans. Forbearance is a possible solution if you don’t qualify for deferment. It can allow you up to 12 months of reduced or no monthly payments in cases of financial hardship, illness, medical or dental internship and certain other circumstances. Deferment or forbearance is also often available to parents who took out loans for their children under the parent PLUS program.

Forgiveness, Discharge and Cancellation

There are some sets of circumstances that can result in you no longer having the obligation to pay your federal student loans. There are, for example, special student loan forgiveness programs for people in public service, medicine and teaching. You may also qualify for discharged student loan debt if you become permanently disabled or if your school closes, but the criteria are specific. Note, student loans cannot be discharged in bankruptcy.

Above all else, you never want to go into default on a student loan. Defaulting on a student loan has tremendous negative impact on credit. Penalties and interest can be added to the loan, and in some cases, your wages may be garnished. Take advantage of the many ways to pay down student loans, and avoid this financial disaster. For more information, speak to your trusted financial advisor.

Wood Smith Advisors, a Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

“Finance Made Simple” blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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