A standard student loan plan of 10 years sounds feasible. Then suddenly, you’re in your 30s and 40s, and the balance lingers. By middle age, with other financial responsibilities, that monthly bill becomes a real drag. Even if you dropped out of school, left that intended career, or maybe never pursued it, student loan debt remains. You can take some proactive steps to dealing with it. Learn more about how you can manage, and eventually eliminate student loan debt.
Analyze Expenses and Extras
Any time someone is in a money crunch is the perfect time to speak to a CPA about creating a budget. Review how you spend each penny. It may be possible to shift more money toward student loans and pay them off faster. Think about:
- Refinancing a mortgage or moving to a place with cheaper rent
- Switching to cheaper utility companies
- Lowering car payments and/or insurance
- More time cooking rather than dining or ordering out
- Walking or bicycling to offset public transit or driving expenses
- Shopping at thrift stores, community swaps, clearances, Craigslist, Facebook Market, and yard sales
- Using rebate apps such as Ibotta and Ebates, for applicable purchases
- Checking qualifications for the Student Loan Interest deduction on your taxes
Refinance Interest Rates to Ease Student Loan Debt
According to the 2017 American Student Assistance report, “The Impact of Student Debt on the Daily Lives of Older Americans,” approximately 62% of debtors have delayed retirement and investment savings because of student loans. Although refinancing is ideal for private loans, which aren’t eligible for forgiveness programs, it may be worth looking into for any plan. With a minimum 650 credit score, you may be able to consolidate loans. In addition, some lenders offer reductions for auto-pay and consistent on-time payments. If you originally had a co-signer for your student loans, remove that name, and re-apply by yourself.
Compare Income-Driven Repayment Plans
Based upon financial criteria, you may be eligible for an Income-Driven Repayment Plan. Calculate 150% of the federal poverty guidelines for your state residency and family size, and subtract that number from your adjusted gross income. The result is your discretionary income, which can be analyzed towards the following:
- Pay As You Earn: Monthly payments are 10% of your discretionary income, payable for up to 20 years. You must have started receiving direct loans Oct. 1, 2011, to apply for PAYE.
- Income-Based Repayment: Also payable for 20 years, the rate is 15% of your discretionary income. This can be applied towards Direct Sub/Unsubsidized, Federal Family Education, Direct Graduate PLUS, and Federal Direct Consolidation loans.
Two plans without income guidelines are:
- Income-Contingent Repayment: Payments are either 20% of discretionary income, or what it would be for a 12-year fixed plan, whichever is lesser. You may actually pay more than your standard rate, with this one.
- Revised Pay As You Earn: REPAYE terms are the same as for PAYE (but without loan start date criteria), and extends to 25 years for post-graduate studies.
Note that these plans may have higher interest rates and that after terms have expired, the remaining balances are forgiven. However, unless you can prove insolvency (more debts than assets with or without loans), forgiven loans exceeding $600 are considered taxable income.
Check Eligibility for Loan Forgiveness Programs
Certain professions are eligible for Public Service Loan Forgiveness, including non-profit and governmental sectors, military, firefighters, law enforcement, Title 1 librarians, and teachers and medical personnel who work in low-income areas. Consult your state requirements if you meet the following:
- Have made student loan payments after Oct. 1, 2007
- Are a full-time employee, or work a minimum of 30 hours/week
The U.S. Department of Education provides more information on Public Service Loan Forgiveness here.
Make a Goal to Pay Off Student Loan Debt
You’re not the only one in their 30s and 40s still struggling with student loan debt. Explore these strategies, consult with a professional, and stick with a plan to finally pay it off. Then focus on saving towards that treat you deserve for being debt free.