Student Loan Repayment Options

My featured speaker on this webinar, Heather Jarvis, is one of the country’s foremost experts on student loans. Heather is a tireless advocate for student loan reform. Her singular dedication to student loans makes her a true authority on the various repayment plans available and the pros and cons of any choice a borrower may consider. 

Key Takeaways from the Webinar

Note: The timestamps are intended to help you find the comment in the full transcript found below. 

• If you are struggling to make payments, call your loan servicer RIGHT NOW. You should ask them to present ALL repayment options available to you in an email or letter. This advice applies whether you have a federal or private loan. While you definitely have options available to you with a federal loan, private loan lenders may also work with you if you are struggling to make your payments.  
• Heather: They also have access to temporary postponements of their obligation to pay. (4:54)
• You can change repayment plans! For example, if you are in a Standard Repayment Plan with a fixed payment amount you can switch to a plan that determines your payment amount based on your income. These plans are known as Income-Driven Repayment (“IDR”) plans. Much of the webinar is focused on explaining the 4 IDR plans.
• Heather: The main way they're different than normal repayment is that they look at adjusted gross income, family size, and the federal poverty rate that corresponds with the borrower's family size. And these are the only factors that influence the payment amount. So, notably, the balance and the interest rate are not what determine the payment amount under these plans (7:17)
• Heather: borrowers who are working in public service jobs may be able to make income driven payments over 120 months or 10 years and earn forgiveness of student loans (8:15)
• Heather: the way these plans work is they look at the poverty guidelines that correspond with a borrower's family size (9:16)
• Heather: The reason we like ICR is because it's the only plan that's available to parent borrowers under the Parent PLUS program. (11:49)
• Heather: How you file your taxes matters relative to the IDR plan you may qualify for (12:48)
• Heather: 3 factors determine your eligibility for an Income-Driven Repayment plan (18:17)
• Heather: But capitalization can be triggered by different events, including switching repayment plans, but also including having a state where that partial financial hardship no longer exists (27:25)
• Heather: for the most part Income-based Repayment for new borrowers, the new income-based repayment is a plan that should be avoided, because the other options are better. (31:39)
• Heather: New borrower (loans from 2014 on) should consider Pay As You Earn versus Revised Pay As You Earn. And the focus of the decision making needs to be on two factors (33:21)
• Heather: REPAYE is less advantageous for married borrowers, if they both have incomes, unless they both also have student loans.  (34:31)
• Larry: There is a big tax on college aid. Save as much as you can! (41:45)
• Larry: Extend the terms of any lower interest rate loans if possible and prepay loans with a higher interest rate (47:00)
• Larry: There is a $53,000 advantage to paying higher interest rates off sooner (51:00)
• Larry illustrates the REPAYE option can be costly! (51:56)

The Question & Answer is a can’t miss. It starts at 55:56 in the replay.