After a three-and-a-half-year hiatus, interest will start accruing on education loans starting Sept. 1. Federal student loan repayments will resume in October.
As borrowers prepare to resume monthly payments, many may be wondering what they can do to pay off their student loan debt within the 10-year standard plan. GOBankingRates spoke to Glenn Sanger-Hodgson, certified student loan planner (CSLP) and financial planner at Shonan Gold Financial, about the best plans for paying off student loan debt in full and making student loans more manageable.
Get a New Job Offering Student Loan Assistance
Why should borrowers explore getting a new job? Aside from the ability to increase your income with a higher salary, many employers are now adding student loan assistance as a company benefit.
Due to the CARES Act, Sanger-Hodgson said employers will now pay up to $5,250 toward student loans on behalf of employees. Fortunately, this amount is not taxable as income for the employee, which Sanger-Hodgson said will help reduce your total tax bill.
Does Your State Offer Any Employment Opportunities?
In addition to looking for employment at companies with student loan assistance benefits, consider employment opportunities at the federal or state level. You’ll benefit from even higher contributions to your student loan payments.
Sanger-Hodgson said these roles usually mean working in an area where there’s a professional shortage. Healthcare professionals, lawyers and teachers are some examples of the most common roles eligible for this benefit. Sanger-Hodgson said these benefits are usually taxable so keep this in mind when reviewing any federal or state employment openings.
Consider Refinancing Student Loans
Refinancing is another way you can pay less over the lifecycle of your student loans. There are pros and cons to consider when refinancing student loans. You may consider refinancing to secure a lower interest rate and have lower payments.
However, Sanger-Hodgson said once you refinance federal loans you lose the benefits associated with them. This includes forgiveness options, income-driven repayment plans and death and disability provisions. Some borrowers may also be required to have a cosigner to refinance student loans in order to secure a more favorable interest rate.
Enroll in the SAVE Plan
You may consider deferment or forbearance appealing options if you don’t have enough money for loan payments. Sanger-Hodgson does not recommend either of these options. “Due to accruing interest, your loan balance can quickly grow out of control.”
Instead, consider enrolling in the Saving on a Valuable Education (SAVE) Plan. Thanks to the 100% unpaid interest subsidy, Sanger-Hodgson said you will be able to keep your loan balance from growing.
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