Student Loan Repayment: Important Considerations if you have Federal Student Loans

February 08, 2022

Student Loan Repayment:  Interview with Laura Bare, CFP with Emerge Wealth Strategies;

Q: What is the current state of Student Loan Repayment?

A: On federal student loans, payments are due to re start on May 1, 2022.  During the pandemic many loan servicers have changed and this delay was done to allow loan service providers to prepare before the repayments were restarted.  A common misconception is that while the forbearance was due to economic conditions when in actuality it was due to processing concerns. While the restart has been moved three times over the past 18 months, I don’t anticipate another delay.  Before you restart paying, make sure you know who your servicer is because it very likely has changed.


Q: If I have a  student loan what should I be doing? 

A: Formulate a repayment plan.  Do you know which repayment program you are currently on?  Can you afford the payment or has your cash flow changed?  Understanding the various repayment plans available to you is critical.  Standard, Extended, Graduated or Income Driven Repayment Plans are available to federal borrowers.  Knowing which option is best suited for your personal situation can save you thousands of dollars in the long run.


Q: Can you give us some basics on the repayment plans?  

A: The standard plan is a straight 10 year repayment.  At the end of 10 years, the debt has been repaid based on the payment schedule.

Graduated and Extended increase the amount of time you pay on the loan. This will reduce the payment amount but you will pay more in interest over time. 

Income Driven may be your best bet.  There are five different programs available Many factors are considered in this option.  Marital status, income level, as well as the number of dependents are considered in the repayment amount.  After making 20 to 30 years of payments, any remaining balance would be forgiven, however the forgiveness may create a taxable event.  Working with a financial professional who understands student loan repayment can help assess your options. 


Q: There has been a lot of talk about the Federal Government forgiving all student loan debt.  Your thoughts? 

A: Wouldn’t plan on that in the near future.  While the relief would be well received, there are too many factors at play right now that make this an unrealistic option for borrowers.


Q: What about Public Service Options?

A: There are options for those working in the non profit sector.  The borrower must be on an income driven payment plan.  After working for a non profit, and making payments for 10 years (120 total payment credits), the loan is forgiven with no further tax consequence.  Your employer must certify annually you are a full time employee.

The opinions voiced in this material are for general information only and are not intended to provide specific
advice or recommendations for any individual.