Student loan debt has become a huge financial albatross for many Americans. CNBC reports that US residents owed a total of over $1.7 trillion in education debt last year. WOW!
The COVID pandemic has made matters worse. Widespread layoffs and high unemployment screeched many debtors’ repayment plans to a halt. The slow reopening of the economy will undoubtedly help but debtors may be surprised to learn some programs can make repayment easier. Phew!
- Outside contributions
- Tax credits and interest rate reductions
- Creative solutions for paying down or forgiving existing debt
Here are a few measures that are already in place, and some others you might not know about, but should.
The CARES Act
The CARES Act was signed by former President, Donald Trump in March 2020. It’s the legislation that sent you that stimulus check. It also paused federally-owned student loan payments until September 30, 2020, which Trump extended through January 31, 2021. After President Biden took office, he extended it further, to September 30, 2021.
One of the CARES Act’s stipulations allowed small businesses to help workers pay off their student loan debt. We’re talking small businesses here; ones with less than 500 employees. Originally, businesses were allowed to contribute up to $5,250 a year, tax-free, to pay off employees’ student debts through December 31, 2020. This provision was also extended, all the way to December 31, 2025, which is fantastic news.
If you’re on a job hunt, it would be worth asking smaller companies if they participate in this once-in-a-lifetime program.
Corporate Student Loan Repayment Incentives
Some larger companies have instituted student loan repayment help as a perk. By some, the most recent data from 2019 shows only 8% of employers partook in such a program. While it’s not a large number, it’s double the number from 2018, so it may indicate an upward trend. We can only hope.
Lending Tree compiled a list of 20 corporations that help pay off student loans which may be helpful when searching for job openings. Some of the names you’ll recognize are Aetna, Estée Lauder, Fidelity Investments, Google, Hulu, Penguin Random House, Staples, the US government, and more. Student loan repayment improves these companies’ standing in the job market as places that treat employees well, as they should.
If you get hired by one such company, don’t hesitate to ask human resources about this perk. It’s okay to be honest about your student loan situation, especially these days when student debts are in the spotlight.
Government Forgiveness Plans
Depending on your profession, most states offer assistance in repaying your student loan. Since they’re offered at the state level, they may even help pay off loans for private schools. Federal programs only help with public schools.
The list of eligible vocations is a bit on the brief side. A searchable list by The College Investor reveals most of them are connected to public service jobs, which include doctors, dentists, teachers, the military, and lawyers.
One of the more popular programs is the Public Service Loan Forgiveness (PSLF). You’re eligible if you work at least 30 hours per week for 10 years in certain public agencies. For example, the Peace Corps and AmeriCorps. You also have to keep up regular monthly payments through an income-driven program the entire time. After you’re done, your debt is forgiven with no tax implications.
Other initiatives include Forgiveness With Income-Based Repayment (IBR), Forgiveness With Pay as You Earn (FWPE), and Forgiveness with Income-Contingent Repayment (ICR).
Refinance Your Loan Payments
Many debtors choose to refinance their student debt, similar to home mortgages. The new finance agreement, with lower interest rates, simply replaces the old one(s). The repayment amount doesn’t change, but the lower interest rate saves hundreds or even thousands, a shockingly large chunk of money. With the extra cash, many debtors make extra payments on their debts to get rid of them faster.
There are some catches to this strategy. Eligibility requirements are quite stringent and once you sign off on a refinancing agreement, you’re stuck with it unless you refinance it again in the future. That can get bureaucratic quickly, but it’s as legitimate an option as mortgage refinancing
Enter an Auto-Pay Program
Loan servicing companies offer interest rate discounts if you sign up with their auto-pay service. How it works is you give the servicer your account and routing information and they withdraw a certain amount from your account every month.
The most common discount rate loan servicers offer with auto-pay is 0.25%. That doesn’t seem very substantial on paper, but it adds up over time, especially if you’re just starting a repayment program. If you can maintain a minimum balance and you’re okay with letting the loan service company control your payments, it’s a strong option.
Move to a New Location
Some areas of the country are desperate for new residents. They may need to replace a workforce that’s getting older or to get doctors and other professionals in their communities. One of the tactics they use is to offer help in repaying your student debt.
Areas that offer this are Hamilton, Ohio, rural Kansas, Clinton County, Iowa, and Maine. If you’re accustomed to the urban lifestyle, you’ll have adjustments to make, but if you’re a professional with certain skills and yearn for the quiet life, they are great options.
These are just a few of the possibilities for repaying your student loan, so you can find something that pertains to your situation. Aside from government and institutional programs, you can alleviate a lot of your debt-related stress with healthy financial practices, such as budgeting and finding additional income opportunities.
Millions of Americans are facing this crisis and you aren’t the only one looking for solutions. Luckily, there are many resources for help and support. Yes, you have student loans, but what you also have is your education and that’s something to be proud of.
Here’s to the Wellness of Your Wallet!