What to Do About Student Loans?
Diane Young, AIF®
Partner, Managing Director
The Supreme Court recently ruled that the Student Loan Forgiveness program could not move forward. After three years of not having to make payments, millions of borrowers will have to start repaying their loans this fall. Over 45 million Americans have student loan debts with the average balance over $30,000 and 49% of people who borrow money for school are still paying it off twenty years later.
Older people often say, “I didn’t have to take out student loans to go to college- why should my taxpayer dollars help them?” Well, the truth of the matter is, back in the 70’s and 80’s, the state funded educational institutions at a much higher rate than today. In fact, when I first attended Oakland University, I was able to work part time at Lakeside Mall, earning minimum wage,to pay for the classes I was taking. Today, a student would have to work 44 hours a week to pay for those same classes because the State of Michigan was helping to fund my education. Now, funding from the State is more than half what it was when I attended college adjusted for inflation.
Many borrowers are still waiting for a miracle to happen and that some of their student loans will be forgiven. While there is some hope that the administration can come up with some relief it would be foolish to ignore repaying your loans now. Keep in mind, only federal student loans can be forgiven. If you refinance your debt to a private lender, you are no longer eligible for relief. It may be tempting to refinance them to a lower interest rate, but make sure you understand the implications first. Once they are refinanced, you cannot go back.
Some steps you should be taking right now, first login into your loan portal and make sure all your contact information is correct. The portal will also show you all your repayment options. There are several options available including some that have lower repayment options based on income. This might work well if you are just getting started in your career and will be making more money as time goes by. The portal will show you the total cost of loan repayment. This is helpful because while the lower payments option may be good for you now, you end up paying more because it takes longer to repay the loan.
There are also options for borrowers who work for qualified non-profit organizations, like schools and hospitals. After making 120 qualified payments on your loan the balance will be forgiven. It can be tricky, so make sure you understand the rules to qualify and that you are filling out the necessary paperwork annually.
Please do not put your head in the sand. Do your homework this summer and keep on top of your student loans.