Student loans can feel like a heavy weight, especially when you're trying to build a stable financial future. Whether you are fresh out of school, back in repayment after a pause, or still trying to make sense of it all, you are not alone.
At Walters Financial Wellness, I believe that knowledge is power and that you deserve a clear, non-judgmental understanding of your options. Let's break down all of it together: the types of student loans, how repayment works, and what forgiveness options may be available to you.
Know what type of loan you have
There are two main types of student loans:
1. Federal student loans (from the U.S. government)
- Common types include: direct subsidized loans, direct unsubsidized loans, PLUS loans, and consolidation loans.
- These are the most common loans and offer lower interest rates, income-driven repayment plans, and loan forgiveness options.
- You can check your federal loan info at www.studentaid.gov
2. Private student loans (from banks or lenders)
- These have higher, variable interest rates and fewer repayment and forgiveness options
- Check with your lender or servicer to see what you have.
Understand repayment options
If you have federal loans, you have several repayment options:
1. Standard repayment
- Fixed payments over 10 years
- You'll pay less interest over time
- Best for those who can afford a higher monthly payment
2. Graduated repayment
- Payments start low and increase every two years
- Still paid off in 10 years
- Good if your income is expected to grow
3. Income-driven repayment (IDR)
- Payments are based on your income and family size
- Terms range from 20-25 years
- Any remaining balance may be forgiven after the term
- Types: Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR).
- These plans can help make payments manageable and even $0 in tough months
Explore forgiveness & cancellation
Student loan forgiveness is unclear at the moment, but there may be some options available to you that depend on your job, loan type, and payment history. To find out more information about applying for forgiveness or cancellation, visit: www.studentaid.gov.
1. Public Service Loan Forgiveness (PSLF)
- Available for government and paid nonprofit workers
- Forgives balance after 120 qualifying payments on an IDR plan
- Must have direct loans and be enrolled in an eligible repayment plan
2. Teacher loan forgiveness
- Up to $17,500 forgiven for eligible teachers in low-income schools
- Requires 5 years of full-time teaching
3. Borrower defense to repayment
- For borrowers who were mislead by their school
4. Total and permanent disability discharge or death discharge
- Loans may be discharged if the borrower becomes permanently disabled or passes away.
Consolidation or Refinancing
1. Loan consolidation (federal only)
- Combines multiple federal loans into one
- Can simplify repayment and make loans eligible for forgiveness
- Interest rate is the weighted average (not lowered)
- IMPORTANT: Consolidating may restart your forgiveness clock
2. Refinancing (private or federal loans)
- Done through a private lender
- Can reduce interest rates, but removes federal protections and forgiveness options
- Best for those with stable incomes and good credit
What to do if you are struggling
You are not alone and you do have options:
- Forbearance or deferment: temporarily pause payments (interest may still accrue)
- Recertify IDR plans annually: your payment may adjust if your income changes
- Contact your loan servicer: They want to help you stay on track. They will let you know what options you may have.
Walters Financial Wellness
Student loans can feel confusing, frustrating, and overwhelming, but you don't have to figure it out alone. You deserve clear answers and realistic options, without pressure or shame. I help clients understand their loans, create manageable plans, and explore forgiveness opportunities. Student debt should never be a life sentence, contact me today for a consultation!