For some households, student loan debt is their biggest monthly expense (after their mortgage). Chances are, these are people who borrowed $100,000 or more to earn an advanced degree, usually in law or medicine. If you or someone you know has over $100,000 of student loan debt, there are some ways to retire it! Here are just three options:
Refinance the student loans. This option may be suitable if you have a high interest rate (7% or greater), have high monthly payments or wish to combine multiple loans. Refinancing consolidates those loans into one new loan with a single payment. You’ll have to consider the size of your monthly payment amount versus the length of your loan; taking longer to repay the loan means a lower monthly payment, but that also means paying more in interest over the life of the loan.
Check eligibility for an income-driven repayment (‘IDR’) plan. This strategy is best if most of your loans are federal and your loan balance is high relative to your income. The plan restructures your debt based on your income, family size, your state, and the type of federal loan you have. The IDR reduces your monthly payment amount based on these factors.
There are four IDR plans to choose from. In general, they each call for a monthly payment between 10% and 20% of your discretionary income. To learn more about IDRs, visit this information page from StudentAid.gov.
If eligible, seek student loan forgiveness. Suppose you work full-time in the government or in any public service job. In that case, you may be eligible for Public Service Loan Forgiveness (‘PSLF’). If you’ve made 120 consecutive monthly payments (10 years), you may be eligible to have the remaining balance of your loan forgiven. Importantly, your loans must be federal; private loans aren’t eligible for the PSLF program. For more information about the PSLF program, visit this information page from StudentAid.gov.
$100k is a lot of money but eliminating that level of debt is doable! For some inspiration, here’s a link to just one story: she paid off $100k in loans making less than $50,000 per year in New York City. Not exactly the cheapest ZIP code in the US!
Think you’re ready to make a move regarding your student loans but want a second opinion? Contact our office today to schedule some time. We’re here to help!
3 Ways to Pay Off Student Loan Debt
October 26, 2022