I have $ 80,000 in student loans, I only earn $ 40,000 a year. How to get out of debt

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Question: “I have high student debt, about $ 80,000 in total. When I got the loans I thought I would pay a lot less than what I ended up paying. Worse still: I couldn’t even use the diploma. Now I only earn $ 40,000 a year and am the only person working in my household. Loans are on hold now, but I’m worried when it ends. I need help trying to figure this out.

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Reply: Like many students who have taken a break on their federal student loans – as part of the coronavirus relief program, the government has suspended loan repayments, prompted a 0% interest rate, and has stopped collecting overdue items – you see the end is near. The program is due to end on January 31, 2022 and you are worried. The first thing to know is you’re not alone: ​​The average student loan borrower has over $ 36,000 in debt, according to the Education Data Initiative. The good news? You have options to help you manage debt. Here’s what you might want to consider.

The first thing to do is to contact your loan officer to talk to them about your options if you are having difficulty. A good option for you may be to consider income-based repayment plans for your federal loans (details here). “If the amount you owe and your monthly payment seem unmanageable, [a good] The option is to contact your service agent to sign up for an income-based repayment plan. This will cap payments at a portion of your income and extend your repayment to 20 or 25 years. When the term is over, the rest is forgiven, ”says Anna Helhoski, NerdWallet student loan expert. There are other federal loan repayment plans (details here) that you can consider.

Loan cancellation may also be an option, says Lee Busby, financial wellness program manager at Johnson Sterling. This is because if you work in the public service – employed full-time by a US federal, state, local, or tribal government or non-profit organization – and your student loan debt is federal, you can apply. a public service loan discount. There are other ways to get loan forgiveness as well, which you can find out here, including forgiveness options for some teachers, and some in the medical and military field. In addition, more and more people are now eligible for loan cancellation thanks to the new policies of the Biden administration. Some employers also have student loan relief as part of their benefits.

Another option for those with student loan debt? “You can also refinance private loans with lower interest rates if you can qualify,” says Busby. This is because interest rates on student loan repayments are currently very low (some start below 2%), and a lower interest rate can mean significant savings for a borrower, as well as the possibility of change the repayment terms and choose a new lender. But note that refinancing has its downsides: If you’re rewriting federal loans, for example, you would potentially have to forgo federal protections like deferral, forbearance, or income-based repayment, so think carefully before doing so. There are also other potential drawbacks. Read the MarketWatch Picks guide to refinancing your student loans here.

* Questions edited for clarity

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