How to Get Out of Student Debt
Student loan debt affects millions of Americans, especially in the COVID-19 era. While good financial planning can lessen the burden, many people are struggling to make their payments regardless.
Since May 2020, the CARES Act has stopped student loan payments, interest and debt collection to provide temporary relief. Some borrowers have seen their loans forgiven under public interest plans. However, payments are scheduled to resume September 1, 2022. If you have been pausing your payments to make ends meet, it’s time to start planning for the future. How can you get out of student loan debt? Read on for our most helpful tips.
Evaluate your budget
In September, you’ll need to figure out how you can start making payments again. You want to avoid delinquency or default, which can affect your credit. It can also lead to wage garnishment, withholding Social Security and income tax benefits and more. If you’re planning to use credit for anything in the future—from credit cards to mortgage applications—you need to take a hard look at your budget.
Consider overall financial circumstances and goals
Next, look at your overall financial circumstances and your personal goals. Look at your monthly budget versus your expenses. Is there room to repay your loans, or do you need to make adjustments? Where can you make changes to support healthier financial decisions?
Research forms of relief
Thanks to income disparity and a tough COVID-19 era job market, there are plenty of people who are struggling to find jobs that pay enough to take care of their student loan payments. Thankfully, there are some ways that you can get relief:
- Forgiveness and loan forgiveness plans: The U.S. Department of Education is reinstating $1.3 billion in loan discharges for certain eligible borrowers. Plus, there are forgiveness plans available, such as the public service loan forgiveness plans. If you were already established in a forgiveness plan, the months where payments were paused count toward the 10 years/120 payment requirement. That’s great news for anyone who has been working in public service while paying their loans off.
- Deferments and forbearances: For temporary relief, you can request a deferment or forbearance based on economic hardship or unemployment. Keep in mind that interest will continue to accrue during this period. However, it’s a good way to make some room in your monthly budget to cover expenses temporarily. Eventually, the deferment or forbearance will end, so you’ll still need to figure out a way to make payments thereafter.
- Refinancing or changing repayment plans: Finally, you can refinance your loans for reduced payments and lower interest, or change the repayment plan to better reflect your economic circumstances.
Keep paying when possible
If it’s possible, try to pay your student loan debt back, even during the repayment pause. Since interest is paused, this is a great time to pay down the principal.
When you need help finding financial solutions, OUR Credit Union can help. Call us today for financial planning assistance, credit and more. We look forward to helping you find success.
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