Student loan debt has reached epic proportions in the United States. In fact, the national student loan debt now exceeds $1.5 trillion, according to a Sept. 2020 article from the U.S. News & World Report.
The U.S. Department of Education has suspended federal student loan payment, and no interest is being charged through at least Sept. 30 due to the COVID-19 pandemic, but that relief only applies to loans owned by the department and doesn’t apply to private loans, which constitute about 8% of all student loans, according to the Federal Student Aid website.
President Joe Biden has also proposed providing additional assistance to borrowers by forgiving up to $10,000 in undergraduate and graduate loan debt. While this proposal is tentative, some loan forgiveness programs and repayment plans exist that can help borrowers reduce or eliminate student loan debt faster.
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Different methods are available to get student loans forgiven, canceled or discharged, according to the Federal Student Aid website. While these terms – forgiven, canceled, and discharged – are sometimes used interchangeably, the site states there are subtle differences between the three: Forgiveness and cancellation are typically based on a borrower’s job. Loan discharge is often related to one’s circumstances.
For example, some public service employees and teachers are eligible for partial student loan forgiveness, while borrowers who become totally and permanently disabled or attend a college that closes are often eligible for loan discharge, the site explains.
In very rare cases, borrowers can have their student loans discharged by filing bankruptcy, but that doesn’t happen automatically, according to the FSA site.
for a picture. From left: Jerry Rogers, Melinda
McRee, Scott Bemjamin and Kevin Sweeney.
Photo Courtesy of Kevin Sweeney.
Student loan borrowers also have multiple repayment options based on their unique circumstances, said Kevin Sweeney, president, chief operating officer and director of investment strategy at Firethorn Wealth Partners, a local investment firm.
“Your repayment goals typically determine the best choice for your circumstances,” Sweeney said. “Do you want to pay off your loans fast to minimize interest charges or lower your payment to maximize affordability?”
Traditional repayment plans typically require higher payments, so the loan is paid off faster, while income-driven plans can lower one’s payment, he added. Sweeney said student loans are an investment that can profoundly affect a person’s future income potential.
“If you are borrowing money that will greatly impact your future earning potential in a positive way, then I would argue that is a good investment,” he said.
Of course, not all borrowers will land high-income jobs or even finish their educations, but they should always borrow money with the intention of paying it back, Sweeney added. It’s important for borrowers to create and stick to a budget that allows them to accomplish multiple financial goals simultaneously, such as paying off debt and investing for retirement, he said.
According to the student loan company Great Lakes, borrowers can choose a repayment plan that fits their financial needs and goals. The lender’s website explains that with the standard option, the payment is the same each month, and the entire loan balance is paid off within 10 years.
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The graduated repayment option allows borrowers to start by making small monthly payments that gradually increase over time, which is ideal for borrowers whose income will increase steadily throughout their careers. The site states that this option gives borrowers up to 25 years to pay off their loan balances.
The site also describes income-driven repayment and loan consolidation. Income-driven repayment can significantly lower one’s payment, but that also means it may take longer to pay off the loan. Consolidation refers to combining multiple student loans into one monthly payment, which eliminates the need to make payments on each loan separately.
Temporary options are available for those who can’t afford to make their student loan payments, such as deferment and forbearance, according to the FSA site. The site also urges borrowers who are struggling financially to contact their lenders to discuss their options, which are designed to prevent loan delinquency and default.
For more information about student loan forgiveness and repayment, contact your lender or visit studentaid.gov.
Josh Heath is a contributor for The Augusta Press. Reach him at producers@theaugustapress.com
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