Having one’s source of income suddenly become unstable is among the most stressful things a person can experience. It can lead to a domino effect further affecting other aspects of their life and finances. The ongoing coronavirus pandemic experienced by people all over the world is the catalyst that has led some to lose resources to pay off their debts like student loans.
The good news is that the American government has promised to implement measures to aid those who are unable to pay off their monthly dues. What more, there are plenty of ways people can significantly decrease their loan payments.
PAUSED PAYMENTS
Unsplash | Over 92% of student loans are federal loans
President Donald Trump has reportedly announced that Americans who have federal student loans will be granted the chance to pause with their payments. This also means that they won’t be accruing added interest for the coming three months, which can then be potentially extended to cover half a year.
OPTING FOR AN EXTENDED PLAN
Another thing struggling borrowers could do at this time is to switch to the Extended Repayment Plan. The option entails, as its name implies, an expanded payment timeline (25 years) that would lead to paying less monthly. One downside of choosing this route is that one would have to pay more in interest in the long run.
A GRADUATED PAYMENT PLAN
Unsplash | The eventual ramping up of payment amounts allows graduates to pay more as their income grows
The Graduated Repayment Plan may be a better option for those who don’t want to pay more interest though. Like the automatic Standard Repayment Plan, it encompasses a decade of payments but differs in the stipulation that borrowers will begin with smaller payments with it increasing as years go on.
INCOME-TIED OPTIONS
One last payment option people should look into are the Income-Driven Repayment (IDR) plans. These are particularly relevant given the current reduced hours or unemployment issues some may be facing due to the coronavirus pandemic.
All plans in this category consider the borrower’s family size and income when calculating for their monthly dues. Usually, people would have to pay up to 20% of their salary for their student loans. After 25 years of paying on time, one can even qualify for forgiveness on the remaining amount they still owe.
REFINANCING & CONSOLIDATION
Unsplash | Borrowers can apply for student loan consolidation online
Those who took out private loans can decrease their monthly payments by refinancing. This means applying for a new loan, which has a lower interest, from another lender to replace one’s previous high-interest loan. Meanwhile, borrowers with multiple loans will benefit from consolidating their debts into one so that they can cut down on interest costs.
