Need a Strategy to Pay Down Student Loans

[WayUpto850]

Greetings myfico members,

I am drowning in student loan debt.  I took out approximately $40,000.00 in student loans back in the 1990s. I became a government worker and have had the loans in deferrment while I pursued a graduate degree.  Then I became ill and had to continue with the deferrment. I did make some payments for a few years until my health and finances once again failed and I now have the loans in deferrment again.

I did not pay the interest in the past and now the debt is approaching $100,000.00!!!!!!! I recently learned that as a government worker I can have the unpaid balance forgiven after paying 120 "quialifying" payments.  My current payment plan  starts at $300/month and gradually increase to about $1000/month.

I am trying to buy a house - I am currently living in sub-standard conditions and I need another surgery which will require me to be in a better place for recovery.  My Drs and nurses are advising me to get into a better living situation,  Rents in Northern California (near San Francisco) are sky high!!!

Any advice regarding how to get an affordable repayment plan that does not increase?  I need a low repayment plan that I can afford for the next 10 years.

Thx Much for your consideration regarding this post!

[Anonymous]

Im doing that same forgiveness income based load plan too. One thing I do know is that you have to keep making the payment though. I believe a deferment will reset that 20yr clock. Call the loan company and verify this in your case. There are hardship instances you can take too to stop the payments but again you want to verify your eligibility and if it will affect your 20yr current set up. When I set mine up it was like 25/MTH. This past year increase to 97.97 and so on over the course of the 20 years for forgiveness. Once I meet the 20 then the remaining balance will be discharged. Yes as a government worker (if you qualify) you can have loans discharged. It also depends on your loan type. Since federal though I believe you should be ok to apply for the terms. For my loan terms I have to login and forwards through the loan servicing portal my yearly tax returns. If the payment is too high (like last year they wanted me to pay 989/MTH before I contacted them with proof of income and bills and worked with a great loan officers) they will work with you and your circumstances. Hope that this at least gives you hope and some sort of starter point. My fed loans are around 84K. Ive been on the govt plan couple years and yes - it does help! Just in case you do not qualify for some reason, they also offer an income based repayment plan to everyone too. You probably have to send in annual tax statement also. There is hope. Dont get freaked out over it though. Just when it comes to mortgage planning and what you can afford, just be sure to factor in the max loan payment of 1K/MTH in case there is an issue with paperwork years down the road and your thrown off. This happened to me last year too and I freaked out and called them right away. I had one month I had to pay that 989$. Lesson learned. I have money set aside just in case this happens again. As far as the next 10yrs, when you are apply too you can do an amortization calculator for 10yrs and work the the loan officer to advise. For me I have thresholds too for income. Since I got a promotion at work and now more bonuses my income has gone up and Im not looking forward to next year at all. But I am not afraid to work with the loan servicing department, they have been really great and take into consideration everything you tell them. Best of luck to you with this and hope all goes well with your next surgery.

Helpful starter research link: https://www.opm.gov/policy-data-oversight/pay-leave/student-loan-repayment/

Income driven plans: https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven

[Anonymous]

If you doing IBR payments under the 10 year forgiveness program, any deferred payments will count towards those 120 on time payments (not consecutive).  I am currently doing the same program I was informed my deferred payments will count because even though you do not make a dollar payment, it is still considered an on time payment.  Therefor you have met the obligation of making an on time payment.

The ONE thing you must do IS every year have your employer sign that PUBLIC SERVICE LOAN FORGIVENESS (PSLF): EMPLOYMENT CERTIFICATION FORM and SUBMIT it annually.   If you look at your loan statements there should be a place where it tells you how many months have been accredited towards that 10 year loan forgiveness time frame. 

All you can do is pay what you can while in deferment, so you can at least lower how much interest capitalizes on your loan.   There is not much you can do about getting out of paying your loans.  Even BK is not doable unless you are dead or 100% disabled.

Just hang in there, I have loans from ITT Technical School but I graduated in 1990 and I can't get them forgiven even though the government shut down the school, only recent grads or current students can luck out on that.

Edit:  Also check with a mortgage lender to find out how much weight student loans are given for the debt to income ratio.  You can also have a mortgage lender check your credit and see if you are eligible/what areas you need to shore up and how much you can afford at this time.

[WayUpto850]

svergie90: Thank you for the insight and links to information regarding student loan repayment plans.  I went to the student loan website and found the "Public Service Loan Forgiveness Employment Certification Form".  I am eager to get this signed and submitted so Student Loans can determine how many qualifying payments I have made so far and when the balance can be forgiven.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

[WayUpto850]

pcsavvy1:  Wow!!!!!!! I am so excited to learn how many qualified payments I have already made.  I just completed the form and I am waiting for my employer to sign it.

Thx for your insight - I pray I am nearing the light at the end of this dark student loan debt tunnel!!!  I also found this Fact Sheet on the Student Aid website:

https://studentaid.ed.gov/sa/sites/default/files/public-service-loan-forgiveness.pdf

https://studentaid.ed.gov/sa/sites/default/files/public-service-loan-forgiveness-common-questions.pd...

[Anonymous]

Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time—for free. 

Contact your Loan Servicer if you would like to discuss repayment plan options or change your repayment plan. You can get information about all of the federal student loans you have received and find the loan servicer­ for your loans by logging in to My Feadual Student Aid.

[WayUpto850]

Thx for the reminder Arnold3!

[Anonymous]

Let me clarify one thing with the Public Loan Forgiveness program, your loan provider will not start the clock on your 10 year program until you submit the paperwork and it does not back date.  So for example, your loan provider receives your paperwork March 1, 2017 the clock does not start until March 1, 2017, any previous ontime payments will not count so you can expect your loans to be forgiven on March 1, 2027 as long as you have resubmittted your paperwork annually.

They started this program Oct, 2007 so if you were smart or lucky to have started your paperwork in Oct. 2007, you will be one of the first folks to get your loan forgiven in Oct. 2017 under the Public Service Forgiveness program. 

Edit:  What Congress giveth, they can take awayth.  So get that paperwork in in case Congress decides to take away or modify the program in the future you are already in and hopefully that will count if they decide to stop the program.