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Easing the Pain of Student Debt

If you’re like many college graduates, you probably feel an uncomfortable pinch each time your student loan bill comes due. Or worse, if you are still trying to land your dream job, that pinch could feel more like a punch.

These days, with college costs rising faster than inflation, you could be looking at student debt of $10,000, $25,000, $50,000 or more. Although it was probably one of the best investments you will ever make for yourself over the long term, a hefty monthly payment can hurt. To help ease the pain caused by your federal student loan, consider these options:

Deferment

You may qualify for a deferment, which allows you to postpone making your student loan payment, usually until you are on more stable financial ground. If you are unemployed, enrolled in college at least part-time or in the military, you may qualify for a deferment. Check with your loan servicer to see if you qualify.

Forbearance

Under special circumstances, such as financial hardship or illness, you can request forbearance from your loan servicer. That means you may be able to stop making payments or at least reduce your monthly payment for up to 12 months—although interest will continue to accumulate. Be sure to ask about the various scenarios in which your loan servicer may be required to grant you forbearance.

Loan Consolidation

If you have multiple student loans, consider consolidating them into one. This move could lower your monthly payment by stretching your repayment timeframe out to 30 years. By consolidating your loans, you may end up paying less interest over the long run, too.

“Pay as You Earn” Repayment Plan

An increasingly popular way to ease your student debt pain is by using an income-driven repayment option. The nice thing about these “pay as you earn” programs is that your monthly payment changes based on how much you make. Consider the newest plan that came out from the federal government last year called REPAYE (Revised Pay as You Earn). It’s just like the older “PAYE” program, except REPAYE extends the option to anyone with a federal student loan, not just more recent borrowers.

With REPAYE, your monthly loan payment will be capped at 10 percent of your discretionary income. Any loan balance on undergraduate loans that you still owe after 20 years of payments will be forgiven. That timeframe extends to 25 years for graduate school loans.

How does the federal government define “discretionary income?” In this case, it’s the difference between your adjusted gross income and 150 percent of the poverty line, which was $18,210 for a one-person household for 2018. For example, if your income is $40,000, your discretionary income would be calculated as $21,790. In this example, your student loan payment would be capped at about $181 per month.

If you’re interested, you can apply online at studentloans.gov for the plan that offers the lowest payment for which you are eligible.

Sooner is Better

Ideally, the sooner you can pay off your student debt, the better off you will be, financially speaking. Over the life of a loan, you can save thousands of dollars in interest, not to mention the headache that comes with still paying for college long after you’ve graduated. However, if you are struggling to make ends meet, be sure to look into one of these options to help ease your pain, or talk to an advisor at Jemma Financial to learn how you can get yourself on stronger financial footing.

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