I only make $41,000 a year but owe $189,000 in student loans. What should I do?
Question: “I will owe about $189,000 on my student loans when repayment begins. I’m so stressed. I was fired from my job and lost my apartment. I have so much debt and moved from New York to Texas looking for work. I started working in e-commerce with an oil pump company, but I will only make $41,000 a year. I’m 45 and live without my car until I move into a studio apartment on the 15th of this month. To help.”
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Responnse: You have already taken huge steps in the right direction and have a number of reasons for optimism. “Moving to take advantage of a lower cost of living just changed half of your budget. With no income tax and low unemployment in addition to the low cost of living, Texas is a good choice,” says Jen Grant, Certified Financial Professional at Perryman Financial Advisory. Also, fixing your living situation will likely improve your mindset and help you realize that repayment of these loans is possible.
First, the emergency student loan pause is now set to end in May 2022, so you’ll want to think about how you’ll approach payments then. A solid option to consider is “trying to get your loans on an income-driven repayment plan, which will cap your monthly payments at 10% to 20% of your discretionary income,” says Rebecca Safier, Certified Loans Counselor students and education finance. expert at Student Loan Hero. Since your payments will be adjusted based on your income, hopefully they won’t be as burdensome as with the standard plan.
“It might be helpful to call your student loan officer before repayment begins to discuss your options and find an arrangement that’s right for you,” says Safier. Also, in most cases, any remaining loan balance is forgiven under income-driven repayment plans if your federal student loans are not fully repaid at the end of the repayment period in 20 to 25 years. .
If you qualify for income-based reimbursement plans, you can choose from options such as income-based reimbursement, pay as you earn, revised pay as you earn and reimbursement based on income. “All have their pros and cons, so be sure to weigh your choices carefully,” says Amanda Push, higher education and debt expert at Student Loan Hero.
Some borrowers who are having serious difficulty repaying their loans “may be able to defer [their] longer payments by requesting a deferral or forbearance,” explains Safier. Both programs allow you to temporarily suspend federal student loan repayments, although it is important to know that often interest accrues during this time and therefore your student loan balance will increase. Additionally, these programs may impact your ability to get loan forgiveness, and you generally need to qualify for these programs. (See details on these options here.)
Plus, “sticking to a budget or finding a side hustle can help with those payments,” says Push. Work on increasing your income to make it easier to repay loans. Networking can help. “Join local groups with similar interests like working out, gardening, cooking, or church. Put your roots down and let people know what you love to do,” Grant says. Even in a tight job market, most jobs are through connections – and a second job can really help you manage your student loans.” Some industries are desperate and eager to be much more flexible than they have been in the past. Take a few shifts at a grocery store, restaurant or retail store…Finally, remember that Rome wasn’t built in a day and student debt isn’t paid off in a year,” says Grant .