3 SURPRISING STUDENT LOAN REPAYMENT FACTS
We've reached the end of another school year, which is always a great time for any student to look ahead. One topic perfect for this is student loans, especially if you're not returning to school in the fall.
Federal student loan borrowers receive a grace period before their first payments are due. Yet, when that first bill arrives, many have the same reaction: surprise. They're not only surprised that their payments are due, but they're also surprised at just how expensive they are.
The idea of how interest works challenges many people – not just student loan borrowers. But in short, while you were in school working on your degree, interest was hard at work too, potentially increasing the amount you owe. Understandably, this is not a fun surprise for students. However, that doesn't mean that "fun" student loan surprises don't exist – although they may be just "fun" to the Student Loan Ranger.
SALT recently pulled together an infographic of 25 surprising student loan facts. Let's dig into three of the most interesting ones. If you're surprised as to how much you owe, these facts can help you successfully manage your debt – whether you just started repayment or not.
Fact 1: If you have an unresolved federal student loan conflict, you can contact the federal Ombudsman for neutral help.
Dealing with student loan issues can feel overwhelming. So much information is out there, and so many resources can help you make sense of it all – or do the exact opposite.
Fortunately, as a borrower, you have an ace up your sleeve. One place will always offer you neutral assistance: the federal student loan ombudsman. OK, two places — the ombudsman and the Student Loan Ranger.
According to the U.S. Department of Education, the ombudsman is "a neutral, informal, and confidential resource to help resolve disputes about your federal student loans." If you have a loan dispute that you simply can't resolve in any other fashion, contact the ombudsman. Such disputes could include discrepancies about federal loan balances; issues related to default, bankruptcy, tax offsets and other concerns; and questions about postponement, discharge and forgiveness requirements.
Fact 2: Some employers offer benefits that can help you manage your student loan debt after college.
Odds are, you're familiar with companies helping pay for their employees to gain additional schooling. Employers see this as a way to invest in their people, with the return on that investment being employees who improve their skills, move up in the organization and do more work for them. However, some employers will pay for your education after you complete it – and not just via tuition reimbursement.
Some employers offer loan repayment assistance programs, known as LRAPs, or other loan repayment benefits as part of their total compensation. These plans may provide a stipend to employees to help cover their loan costs, or they may reimburse employees for loan payments they've already made.
To find out if your company participates in such a program, contact your human resources team. This benefit is something this Student Loan Ranger has used firsthand, and based on that experience, we can vouch for just how helpful it can be.
Fact 3: In extreme cases, student loan borrowers can reduce their payments to as little as zero dollars per month.
Federal student loan borrowers may be eligible to take advantage of a number of different income-driven repayment plans. These plans can seriously shrink your payments, based on your income and your family size.
What some borrowers might not realize, though, is just how small a payment can actually be. If you qualify for income-based repayment or Pay As You Earn, you could actually pay zero dollars per month – but you don't have to send in a check or anything.
Qualifying for zero dollar payments has its pros and cons. On the downside, paying less each month means you could pay more overall, as your loan will have more time to accrue interest. On the bright side, IBR and Pay As You Earn both offer loan forgiveness after you make a specific number of eligible payments, and zero dollar payments are considered eligible.
When deciding to switch repayment plans, you'll want to calculate how exactly it will affect you, now and in the long run. Decreasing your payments ultimately may not make sense for you, but it's still a nice, surprising option to have if you need it.