Understand The Student Loan Provisions Of The Cares Act
Student loan relief is just one aspect of the CARES Act, a large piece of legislation passed in March 2020. If your employees have questions, heres the immediate impact on them:
- Most federal loans have automatically been placed into administrative forbearance, which means they can stop making payments, without incurring interest or penalties, until September 30, 2020. Borrowers can check to see whether their loans qualify by calling their loan servicer.
- Borrowers who want to continue making payments during the forbearance period can do so. Since the interest rate on loans will remain at zero, any payments will go directly toward reducing principal.
- The CARES Act does not offer relief to borrowers with private student loans, although there are some state programs available.
Get A Lower Interest Rate
If seeing your student debt balance balloon is what contributes to your anxiety, getting a lower interest rate might help.
Refinancing your student loans means trading in your current loan for one new, consolidated loan through a private lender.
Through refinancing, you can earn a lower interest rate while also having the opportunity to choose a loan repayment term that works best for your current financial situation. Perhaps you want to accelerate your debt payoff and shorten your loan term by making higher monthly payments each month. Or you could choose to extend your loan term so that your monthly payments are smaller.
Breaking your debt into smaller, more manageable payments may help you feel more at ease, says Taylor.
With federal student loan payments on pause and interest set to 0% through August 2022, federal student loan borrowers should wait to consider refinancing until the forbearance period ends.
On the other hand, refinancing right now is a good idea for private student loan borrowers since rates still remain low.
While most lenders require you to have good credit, Earnest Student Loan Refinancing allows fair credit applicants with a minimum credit score of 650 to qualify, and there are no minimum income requirements.
Take It One Step At A Time
Paying off student loans can feel like a marathon rather than a sprint. While it might be years before youre debt-free, remember that youre making progress every day.
While your student loan balance might be daunting, your best course of action is to take things one day and one payment at a time. That way, you can gradually chip away at your balance until it goes down to zero or you qualify for student loan forgiveness.
Slowly but surely, you can move closer to a life free from student debt.
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Your Job Might Get You Out Of Paying
Public service jobs have a pretty good trade off for ridiculously high loan amounts: 120 on time payments have to be made, but then the remaining debt is wiped clear. If you have debts in the hundreds of thousands, this can be a life saver. You have to pay consistently for 10 years, but you only have to make your minimum payments, and then, in some cases, the debt is erased. What a relief!
Education Department Updates Limited Pslf Waiver Guidance
With only six weeks remaining until the expiration of the Limited PSLF Waiver, advocates have grown increasingly concerned that millions of borrowers who are just learning about the initiative may miss the boat on receiving relief. Many borrowers will have to take specific steps by October 31 to qualify for PSLF credit and loan forgiveness. Specifically:
- Borrowers with FFEL-program loans would need to consolidate those loans via the federal Direct consolidation loan program.
- Borrowers who have not submitted PSLF employment certification forms for each public service employer they have had would need to do so.
Both of these steps can take time to complete, and even longer for the Education Department to process. Borrowers and advocates have been worried that if Direct loan consolidation and employment certification are not completed by October 31, borrowers would lose out on PSLF relief.
This month, the Education Department has updated its Limited PSLF Waiver guidance and clarified that borrowers must submit their relevant applications by October 31 to qualify for the Limited PSLF Waiver, but those applications do not have to be processed by the Education Department by that date for borrowers to receive relief.
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Don’t Let Debt Make You Regret Your College Years
Student loan debt is a reality for many U.S. adults. Estimates suggest Americans owe approximately 1.75 trillion dollars in student debt. Around 62% of 2019 graduates left school owing an average of $28,950.
For many, taking out student loans is often the only way to afford higher education. Even so, it isn’t uncommon for many people to look back and wonder if college was worth the debt they acquired to pay for it.
While it is normal to look back and wonder if you might have done things differently, you dont need to let your debt make you regret your college years. Even if hindsight tells you that you might have made different choices if you were doing it againwhether that would mean borrowing less, attending a different school, or earning a different degreeyou can still appreciate the lessons and experiences you gained from your college experience.
If you find yourself regretting the college debt you have, there are a few things you can do to help ease your mind. Going to school was an investment in yourself and your future. Putting things in perspective can help you focus on finding ways to manage your current debt without regretting your college years.
Do Not Refinance Your Student Loans
If you refinance your student loans with a private lender, you won’t be eligible for Biden’s student-loan forgiveness. But, says Lewis, “What’s going to happen is, the commercial market is going to be really competitive and try to convince people to refinance.”
Resist the temptation, says Lewis, adding, “I think about all the people right before the pandemic who switched their loans from a federal lender, and now they have no protection. They’re not gonna get any of that money from Biden. Do not leave your loan lender.”
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Practical Ways To Manage Student Loan Debt
Monthly student loan payments can make it hard to focus on other financial priorities. But there are ways to reorganize your debt:
- Adjust your monthly budget. If there are nonessentials taking up space in your budget, like subscription services or gym memberships, consider cutting them out. An extra $20 each month can help you chip away at your loan balance faster.
- Contact your lender about hardship options. Federal student loans offer several types of deferments and forbearances that will temporarily pause payments, and private student loans often come with something similar. Check with your lender to see what options you have.
- Switch your repayment plan. If you have federal student loans, you can sign up for a repayment plan based on your income, which could lower your monthly payments significantly. If you have private student loans, you can also consider refinancing to a lower monthly payment or interest rate.
- Reach out to a professional. If youre having trouble managing your finances and debt, reach out to a certified financial planner to help create a debt payoff plan that works for you and your financial situation.
- Avoid big expenses. Morin advises waiting to make big purchases like a new house or car right away, since doing so will only lead to more debt. Youll be able to enjoy those things much more when you feel like you have a solid plan for getting your student loans paid off, she says.
How To Apply For Bidens Student Loan Forgiveness Program
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Some 40 million federal student loan borrowers are slated to have a large chunk and in many cases all of their student debt forgiven.
President Joe Bidens forgiveness plan, announced at the end of August, will cancel up to $10,000 in federal student loan debt for borrowers with an annual income less than $125,000. Borrowers who received a need-based Pell Grant while in college can receive up to $20,000 of forgiveness, so long as they meet that same income cap.
For most borrowers, that relief wont come automatically. Government officials have indicated the vast majority of people will need to apply in some fashion for forgiveness.
The U.S. Department of Education estimates that it has enough information on nearly 8 million borrowers to forgive their loans automatically. Otherwise, officials have encouraged everyone who thinks theyre eligible to apply when the application is live.
Heres what we know so far about applying for student loan forgiveness.
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How Student Debt Impacts Heart Health And Stress
To perform the study, investigators used data obtained from the National Longitudinal Study of Adolescent to Adult Health , a panel study of 20,745 adolescents and teens in grades 7 to 12 who were first interviewed during the 19941995 school year. Four more waves of data were collected over a period of more than 20 years in the last wave, participants were invited to in-home medical exams.
Researchers then assessed biological measures of cardiovascular health of the 4,193 remaining qualifying subjects using the 30-year Framingham cardiovascular disease risk score, which considers sex, age, blood pressure, antihypertensive treatment, smoking status, diabetes diagnosis, and body mass index to measure the likelihood of a cardiovascular disease over the next 30 years of life. They also looked at levels of C-reactive protein , a biomarker of chronic or systemic inflammation.
The investigators classified people who had taken out student loans according to the following: never had student debt, paid off student debt, took on student debt between waves, and consistently in debt. To try to isolate the health impact of the student loans, models were adjusted for respondent household and family characteristics including education, income, sex, age, and other demographic information.
Key findings included:
Supplemental analyses suggested that, on balance, a college degree provides health benefits even to those with student debt, according to the authors.
Takecontrol Of Your Loans
Now that you understand the ins and outs of your loans, lets go over some strategies for getting them paid off as quickly and smoothly as possible.
Knowwhat you owe. Make a list of your student loans. Include whether theyre private or federal, monthly payment and due date, the current and principal balances, the interest rates, and servicer. For federal loans, it will also help to know what type of loan it is and the name of your repayment plan. If youre not sure,start by checking your free credit report. You can look up your federal loans at studentaid.gov.
See if your loans fit into your budget and pay schedule.Making a budget and exploring strategies for reducing debt will help you see how your student loans fit into your finances. Request a different due date if that would make it easier for you to make your payments on time and in full.
Make sure your federal repayment plan is the best one for you. You can use the Education Departments Loan Simulator to compare plans by monthly payment, total interest, and more.
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Should You Be Scared Of Student Loans
While you should take student loan debt seriously, you shouldnt have a fear of student loan debt. These loans can help you earn your degree and start the life you always dreamed of enjoying. As with all things that relate to finances, be careful with student loans, but they can be manageable and far from scary with a plan in place.
Come Up With A Repayment Plan
Instead of ignoring your student loans, come up with a repayment plan that works for your budget. With a clear strategy, youll be able to see the light at the end of the tunnel.
The number one thing I advocate for individuals when coping with student loan stress is to make a financial plan, said Bob Forrest, a financial advisor at RBC Wealth Management. A lot of our anxiety as humans in general comes from the unknown Do yourself a huge favor and create a comprehensive financial plan. Youll see not only that you will pay off the loan, but youll see how and when youll pay it off as well.
Write down all your loans and interest rates, and use student loan calculators to set goals. As your financial situation changes, adjust your plan accordingly. If you find ways to make more money or reduce your expenses, you might even be able to make extra payments to pay off your student loans ahead of schedule.
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Make A Debt Repayment Plan
Lack of financial planning can make college debt regret worse for some people. According to one survey, the majority of borrowers under 40 regret not spending more time planning how they would manage their student loans.
Be proactive about making payments on your loans. The sooner you get them paid off, the better you’ll feel about your college experience overall.
But if you’re struggling with college debt, remember that you’re not alone. There are resources available that may help you get on track financially.
Speak with your financial aid office or consult a financial advisor to develop a plan that works for you. In many cases, you can get your college debt under control and start enjoying the benefits of your degree.
Take This Opportunity To Offer More Financial Education
Even with the relief provided by the CARES Act, many of your employees likely still face challenges when it comes to student loans, particularly if they have large private student loan balances.
They may benefit from education or resources around loan consolidation and debt repayment. That can take the form of thought leadership content, webinars or live coaching. Those employees who can take advantage of CARES Act student loan provisions may be unsure whether they should continue making payments during forbearance or put that freed up cash toward retirement or other financial goals, such as an emergency fund.
Employers do an exceptional job with executive benefits and estate planning for folks with complex financial situations, says Tom Conlon, Morgan Stanley Head of Retirement Sales. Its important to also cater to those folks who are just coming into the workplace for the first time.
If you offer financial coaching as part of a financial wellness program, directing workers to enlist the help of a coach may be helpful. Otherwise, you may want to point them to other resources, such as the Consumer Financial Protection Bureau or the Institute for Student Loan Advice.
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Start A Budget Right Now
When you’re in college you are planning for your future life, so you need to have a budget and know your numbers ASAP.
Everyone has different spending habits. Take the time to record your monthly spending and familiarize yourself with your needs and wants. What are your basic expenses rent, phone, internet, food, gas, etc.? How much are you spending on extras such as going out to eat or buying new clothes?
Go through your bank statements and try to separate your needs vs. your wants. It is important to discipline yourself, while also being able to forgive yourself. Hold yourself accountable, but understand that it’s not easy to budget in school with so many expenses.
“You have to think about the future all the time when budgeting. The better you know yourself, the easier budgeting will be,” Bily said.
Buffie Purselle, author of “Crawl Before You Ball,” emphasizes the importance of being conservative with spending and budgeting in college to set you up for success after you graduate .
“Put forth a plan to achieve what you want,” Purselle said.
Everyone has a different approach to budgeting, but this is how many students go about doing so: First, figure out how much you need to spend on necessities such as food and gas. Then, create an emergency fund. Set aside some money every month that you won’t touch unless absolutely necessary. Purselle warned against falling into the trap of overconsumption. Try as best you can to restrict your budget for unnecessary things.
Four Tips To Reduce Student Loan Debt Stress
One of the best tips to cope with your student loan stress is deciding on how much you will be able to pay every month. If your budget is being eaten up by your student loans, you may want to renegotiatethe amount of money you pay each month. This wonât be an option for every loan, but itâs worth asking your loan provider if you can lower your monthly payment amount slightly. Yes, it will take longer to pay the loan off, but it also means that youâll be able to manage a more realistic budget each month. If your income increases in the future, you can increase your monthly payment amount to the bank.
Depending on what type of loans you have and what type of work you do, you may be eligible for some form of student loan forgiveness. If you have federal student loans, you can qualify for student loan forgiveness by going into certain public service professions, such as teaching. Itâs worth checking to see if you fit the criteria for student loan forgiveness, as it can significantly lower the amount of money you pay in the long run.
There are many other ways on how to reduce student loan stress or stress in general. For example:
- Try breathing exercises for relaxation.
- Soak in a warm bath.
- Listen to soothing music.
- Use guided imagery.
PS: If thereâs anything more youâd like us to know about. Add it to the comments section!
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