This blog post was written in collaboration with TIAA.
The country’s student loan debt currently tops $1.6 trillion and is growing six times faster than the economy. And while many federal borrowers benefited from a temporary deferment of their loans in 2020 and the first month of 2021, the New Year will likely require revisiting our balances and re-strategizing the pay off.
As student debt has become such a big concern, companies are even offering programs as part of employee benefits, such as one called Savi.
Here’s my advice on how to ease the burden.
Keep communication lines open with your lender
Whether you have a federal or private loan (or both), it’s important to stay knowledgeable about all of your options directly from your lender. Learn about all of your options including income driven repayment, PSLF and refinancing. You don’t know unless you ask. It’s also critical to reach out to your lender prior to missing a payment. If you foresee having any challenges with making your monthly loan payment because of a job loss or other setback, it’s very important to get ahead of it. Don’t wait to inform your lender before it’s too late. The best time to receive help is when you anticipate having a hard time making payments.
Consider extending the term
One of the things you may learn you can do through your lender is stretch out the term. Extending the term of your loan from, say, 10 to 20 years could buy you some financial breathing room, since when you extend the term, your monthly payments drop.
Keep in mind that your interest rate typically remains the same, so this strategy does end up costing you more in the long run. So, as your finances improve, begin making bigger payments towards the principal of the loan to help you pay down the debt faster and without less of an interest burden.
Leverage employer benefits
Does your employer offer student loan repayment benefits? It’s worth asking. This is an increasingly popular benefit, as companies recognize the demand for help around student loans. It’s not gone mainstream yet, but the trend is moving in a positive direction. The Society for Human Resources Management (SHRM) found the number of companies offering student loan repayment doubled to 8 percent in 2019.
TIAA has joined forces with social impact technology startup Savi to make it easier for
nonprofit organizations to offer meaningful student debt relief services to their employees and help them take advantage of income driven repayment plans and the Federal PSFL program.
Employees at participating TIAA institutions already using the solution are saving on average $222 each month. TIAA projects average forgiveness of over $51,000 per employee. Learn more about the collaboration at www.tiaa.org/savi
Consolidate if it makes sense
Consolidating multiple loans into one loan can be a great way to simplify and streamline your debt payments into one single monthly payment. The best case scenario, after consolidating, is if you can bank on a lower average interest rate, which would reduce your monthly balance. To consolidate your loans you can shop around. You don’t have to necessarily stick with your current lender.
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