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Summer is a perfect time to review your student loans and create an action plan for student loan repayment.
Here are the top 5 student loans questions and answers this summer:
1. My student loan servicer enrolled me in a student loan repayment plan. My understanding is that my student loans automatically will be forgiven after 20 years. Is this correct?
Make sure to differentiate between federal student loans and private student loans.
The Revised Pay As You Earn (REPAYE) repayment plan offers student loan forgiveness of your remaining student loan balance after 20 years (undergraduate) or 25 years (graduate) of student loan repayment of direct, federal student loans.
If you have private student loans, there is no repayment plan or student loan forgiveness option offered by the federal government.
Therefore, if your student loan servicer offers you a repayment plan, this repayment plan is between you and your servicer and not associated with any federal repayment plan.
If you enroll in a repayment plan, you may receive a lower monthly payment, but interest charges are still accruing on your principal balance.
Student loan repayment plans – federal or private – do not lower your interest charges. They raise your overall interest cost.
Action Plan: If you want to lower your interest rate and monthly payment, your best bet is student loan refinancing.
2. I heard that the president’s new budget cuts the public service loan forgiveness program. I have been employed in a public service role for six years and am counting on this program to help repay my student loans. What do I do?
You’re not alone. More than 550,000 borrowers have signed up for Pub lic Service Loan Forgiveness.
Importantly, while the President proposes a budget, only Congress passes appropriation bills. Therefore, the president’s budget will be debated further before any spending or spending cuts are initiated.
The U.S. Department of Education confirmed last month that the president’s budget will not impact existing student loan borrowers who are currently enrolled in Public Service Student Loan Forgiveness, but will impact anyone who borrows a student loan after July 1, 2018.
Take Action: If you work in public service, ensure that you work in a qualifying public service role at a qualifying public service employer.
3. How do I enroll in Public Service Loan Forgiveness? Under this program, will my private student loans also be forgiven?
Submit the Public Service Loan Forgiveness Employment Certification Form annually or whenever you change jobs to help you track your progress toward meeting the eligibility requiremen ts.
This form verifies that you have completed the employment requirements each year for the program. The U.S. Department of Education will review your form to ensure it is complete and meets the employment requirements.
Then, you should submit the form and employer’s certification to FedLoan Servicing, which is the U.S. Department of Education’s student loan servicer for the program.
FedLoan Servicing will inform you if you are eligible, how many qualifying student loan payments you have made, and how many qualifying student loan payments remain for you to qualify for Public Service Loan Forgiveness.
Public Service Loan Forgiveness is only for direct, federal loans. Therefore, private student loans are ineligible for Public Service Loan Forgiveness.
Take Action: If you plan to enroll in Public Service Loan Forgiveness, now is the time.
4. If Navient is found liable in its lawsuit with the CFPB, will I receive some student loa n forgiveness?
The lawsuit against Navient was filed by the Consumer Financial Protection Bureau (CFPB), which is a federal government agency.
Therefore, there are no individual litigants nor is this lawsuit a class action lawsuit.
If your student loans are serviced by Navient (or any other student loan servicer), you will not receive student loan forgiveness as a result of this lawsuit.
Take Action: You can file a formal complaint with the U.S. Department of Education and the Consumer Financial Protection Bureau. You can also submit a formal complaint to both your lender and servicer.
5. I have a student loan with a variable interest rate, and am concerned that my monthly payments will increase now that interest rates are rising. Am I stuck?
You are correct that as interest rates rise, your variable interest rate on your student loan will also rise.
However, not all is lost. You can choose to refinance your student loans from a vari able to a fixed interest rate student loan.
With a fixed interest rate student loan, your interest rate will stay the same so long as your student loan is outstanding – regardless of interest rate movements (up or down).
When you refinance, you lower your interest rate and monthly payment.
You can use this student loan refinancing calculator to calculate your potential savings.
Take Action: Student loan refinancing enables you to switch from a fixed to variable rate interest rate, or vice versa. You can also choose a different loan repayment term typically ranging from 5-20 years.