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Managing Student Loan Debt: Understanding Your Options

Explore the various options for managing student loan debt, including income-driven repayment, loan forgiveness programs, employer assistance, grants, bankruptcy, and refinancing. Learn how Black women are disproportionately affected by student loan debt and how to make the best financial decisions for your specific situation.

Questions Answered in this Article

Q: How is the Supreme Court currently deciding on the cancellation of student loan debt? A: The Supreme Court is currently deciding on the cancellation of up to $20,000 in student loan debt for over 40 million borrowers.

Q: How will Black women be affected if the Supreme Court decides against the Biden administration? A: If the court decides against the Biden administration, Black women will be the group most affected as they bear a disproportionate amount of the federal student debt total with higher debt averages than any other demographic.

Q: What are the new features of income-driven repayment that could decrease monthly payments? A: The Department of Education is introducing new features to income-driven repayment (IDR) which could significantly decrease monthly payments and allow for earlier loan forgiveness. Additionally, a one-time IDR waiver will be offered this summer, which will count more months towards the time needed for forgiveness.

Q: What is the Public Service Loan Forgiveness (PSLF) program? A: The Public Service Loan Forgiveness (PSLF) program offers full loan forgiveness to those who work in public service or for nonprofit organizations. Under this program, borrowers who make 120 qualifying payments can have their remaining balance erased. Additionally, all months, even without payment, during the interest-free forbearance period count towards the 120 payments.

Q: What are some options for private student loan forgiveness or reduction? A: For private student loans, options include refinancing, employer assistance programs, repayment grants, and bankruptcy. It’s important to research different options and find the one that best fits your needs. However, it’s recommended to compare offers from several lenders before making a decision. Refinancing should only be considered if it results in savings each month or over the long term. If it results in an increased interest rate, it should be avoided.

Navigating Student Loan Debt: Solutions for Black Women and All Borrowers

The Supreme Court is currently deciding on the cancellation of up to $20,000 in student loan debt for over 40 million borrowers. If the court decides against the Biden administration, Black women will be the group most affected as they bear a disproportionate amount of the federal student debt total with higher debt averages than any other demographic. According to a study by The Education Trust, Black women have 43% more undergraduate debt and nearly 99% more graduate school debt than their white woman counterparts 12 months after graduation. Additionally, college-educated Black women earn 10% less than college-educated white women and 34% less than college-educated white men on average. Though Biden’s cancellation would help many Black women, it is important for them to actively and strategically manage their student loans regardless of the Supreme Court’s decision.

MORE: Department of Education Announces Changes to Income-Driven Repayment Forgiveness Criteria

Income-Driven Repayment: Lower Payments and Earlier Forgiveness

The Department of Education is introducing new features to income-driven repayment (IDR) which could significantly decrease monthly payments and allow for earlier loan forgiveness. Additionally, a one-time IDR waiver will be offered this summer, which will count more months towards the time needed for forgiveness. Under the new rules, borrowers with loans more than 10 years old and an original balance of $12,000 or less may qualify for immediate forgiveness. Borrowers with a higher original balance but loans closer to 20 years old may also see expedited forgiveness through the waiver.

MORE: Revised Income-Driven Repayment Plan for Undergraduates: The Most Generous Plan Yet

Other Forgiveness Plans: Public Service, State Programs, and Employer Assistance

The Public Service Loan Forgiveness (PSLF) program offers full loan forgiveness to those who work in public service or for nonprofit organizations. Under this program, borrowers who make 120 qualifying payments can have their remaining balance erased. Additionally, all months, even without payment, during the interest-free forbearance period count towards the 120 payments. The Department of Education’s upcoming waiver could also make it possible for borrowers to receive total forgiveness sooner. Additionally, many states offer their own loan forgiveness programs that may be tied to a degree plan or employment type and have varying amounts of forgiveness. Borrowers should contact their state’s education department to explore these options.

Employer Assistance Programs

Employer assistance programs can help repay student loans by providing payments towards outstanding balances each year or month. These payments may be linked to a service obligation, so it’s important to understand the terms before accepting them. To find out if your employer offers student loan repayment benefits, contact the human resources department.

MORE: Student Loan Forbearance Extension: What You Need to Know

Repayment Grants and Bankruptcy: Last Resort Options

There are several private and nonprofit organizations that offer grants to help borrowers pay off their student loans. These grants can provide financial assistance to those who are struggling to make their loan payments. The eligibility criteria and award amounts for these programs vary, so it’s important to research different options and find the one that best fits your needs. One resource to find these opportunities is Bold.org which lists a variety of grants and scholarships for student loan repayment. It’s also worth looking into other organizations such as non-profit organizations, foundations, and even some employers that may offer student loan repayment assistance programs. It’s important to note that these grants are limited and competitive, so it’s important to apply as soon as possible and meet the required criteria. Keep in mind that these grants are not guaranteed and you should also consider other options such as income-driven repayment plans and loan consolidation as well.

Bankruptcy

If you have exhausted all other options and are still struggling with student loan debt, bankruptcy may be a viable option. However, it’s important to note that it is not the right choice for all borrowers, and it is important to consider other options first. For example, if you have loans owned by the Department of Education, it is worth waiting and seeing what happens with the proposed relief plans. Additionally, many borrowers with federal student loans may be able to receive relief through other government programs. It’s important to consider all your options and speak with a student loan bankruptcy attorney who can advise on the best course of action for your specific situation. “Bankruptcy can be a shortcut to debt relief, but it’s not a financial death sentence,” says student loan bankruptcy attorney Stanley Tate.

Refinancing for Private Student Loan Borrowers

Individuals with private student loans have limited options for cancellation or forgiveness, but refinancing may be a way to lower interest rates and monthly payments. It’s important to note that refinancing is not recommended for those with federal student loans, as it would mean losing the opportunity for any potential government forgiveness. However, for those with private loans, government forgiveness programs are not an option. Before making a decision, it’s recommended to compare offers from several lenders to find the best deal. Refinancing should only be considered if it results in savings each month or over the long term. If it results in an increased interest rate, it should be avoided.

It’s important to understand your student loans and be aware of all your options when it comes to managing debt. However, Fenaba Addo, author of “A Dream Defaulted: The Student Loan Crisis Among Black Borrowers”, states that solving this problem requires more than just financial education. “This was an issue that was created by poor policy, and it has to be fixed through policy.” Addo encourages Black women to push elected officials to find solutions.

Summary

  • The Supreme Court is currently deciding on the cancellation of up to $20,000 in student loan debt for over 40 million borrowers.
  • Black women are disproportionately affected by student loan debt, with 43% more undergraduate debt and nearly 99% more graduate school debt than white women 12 months after graduation.
  • The Department of Education is introducing new features to income-driven repayment (IDR) which could significantly decrease monthly payments and allow for earlier loan forgiveness, as well as a one-time IDR waiver being offered this summer.
  • Public Service Loan Forgiveness (PSLF) program offers full loan forgiveness to those who work in public service or for nonprofit organizations, with 120 qualifying payments needed for forgiveness.
  • Other loan forgiveness options include employer assistance programs, repayment grants, and bankruptcy, but these options should be considered after all other options have been exhausted
  • Refinancing may be a way to lower interest rates and monthly payments for those with private student loans.

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