Is your financial standing suffering the impacts of an unpaid student loan debt? Is it becoming hard for you to clear your monthly loan payment? If you happen to find yourself under these conditions, it is possible to offload the burden. There are numerous loan repayment plans you can sign up for. Consolidating your debts is another alternative that will help you lower the financial burden on your shoulders.
Keep reading or search further into the article for options at your disposal when it comes to finding relief from student loan servicing. By taking up one or several of these tips, you will soon realize that you can service your student loan without straining your bank account or financial status.
Income-Based Repayment Plan
Each student with a federal student’s loan is enrolled on the standard repayment plan that they will service the debt with their income upon graduating or leaving college. In this plan, you are expected to service your student loan in a fixed monthly installment stretched over a period of ten years.
With this plan, you will manage to repay the debt faster, and the interest charges are the least among all other plans. The only shortcoming is that the monthly installment might be a bit high. Fortunately, there are other income-based student loan repayment plans, including:
• Income-contingent repayment
• Revised pay-as-you-earn
• Pay-as-you-earn
Under these alternative plans, your loan repayment window is extended to at most 25 years, and the monthly installment is capped at a specific percentage of your gross income. Depending on the loan balance, the size of your family, and your income, the monthly payment can be pushed lower than the standard plan.
The payment is, however, adjusted as per your current life situation as it changes over time. The key takeaway here is that your monthly installment is slightly lower in an income-based plan compared to the standard one.
However, this convenience does not come without an expense; you will end up paying a higher interest rate. You will have to decide whether the trade-off is worthwhile.
Graduated Repayment
If you are earning a high income such that you are eligible for the income-based repayment plan, you can lower the monthly installment by registering for the graduated repayment plan. The monthly payments under this plan start low and increase every two years.
The graduated repayment approach has a loan clearance term of ten years. Although this plan will seem convenient as you start out, it will soon turn out to be overwhelming as your monthly payments increase. Another shortcoming is that you will end up paying more interest compared to the traditional standard plan.
Extended Repayment
If your federal student loan exceeds $30,000, you are eligible to apply for the extended repayment plan. With this plan, you are allowed up to 25 years to clear the student debt. You also allowed the liberty to choose either graduated or fixed payments.
Since the term for loan clearance is longer, the monthly payments are significantly lower compared to standard and graduated repayment plans. Just like other alternative student loan repayment options, you might end up paying more interest than what you would have paid under the standard repayment plan.
Consolidating Your Debts
If you happen to have other debts besides your federal student loan, every debt has a different interest rate, monthly installment, and repayment term. In such a situation, consolidating your debts under the Direct Consolidation Loan is a smart move.
Under the Direct Consolidation Loan, you are allowed to take a loan equivalent to all your loans, clear the preceding debts, and are left paying one monthly installment for the new loan.
The new loan accrues an interest calculated from the average of the preceding interest rates. There is no way to ascertain that this plan will reduce your monthly installments, but it is worth considering it.
Before acting upon the loan consolidation option, please take time and make sure you comprehend the ramifications. Assess the interest rate and monthly installments over the long haul.
While lowering your monthly payment might be a temporary relief, you might end up losing more money in the long run by paying a higher interest rate.
Summary
You shouldn’t strain your finances just because you are servicing your student loan. If the object of taking up the loan was to make your life easier through college, why should it be a burden to you right now? Find the plan that best suits your needs and sign up for it to help lower the burden.
