Know Your Options to Reduce Student Loan Payments
The Student Loan Ranger receives many questions from readers. On occasion, we like to share some queries that other borrowers are likely to relate to .
Here's a sample of some we've addressed recently. Letters have been edited for clarity and to protect readers' privacy.
[Read stories about how real borrowers repay their student loans.]
Q. I have student loans in my name and in my mother's name. I'm looking into consolidating them and applying to reduce my monthly payments like with an income-driven repayment plan.
At the moment, I owe about $1,200 a month from the two. I'm also starting a new job right now. I've been in training, not really getting paid, for six weeks. I actually start working on June 1 but won't get paid until July 1 at the earliest.
I'll be making about $2,300 a month. On top of all of that, I'm being relocated from Texas to Colorado so I have a lot of moving expenses right now. Do you have any suggestions or advice on how I should handle my situation? -Too Many Expenses
A. I'm afraid you cannot consolidate your mom's and your loans together without using a private loan, and there are no income-driven plans in the private student loan market.
Instead, I would go to studentaid.ed.gov and use the repayment calculator to find a payment plan for the loans under your name and for the parent PLUS loans, which will remain in your mother's name, that will give you the best payment overall.
PLUS loan payments will be based off of her information -- but if she has a low income, you could have her consolidate just those PLUS loans at the same website -- and request income-contingent repayment to help get the payments down further.
Parent PLUS loans are only eligible for income-contingent repayment and only if consolidated under the direct loan program. Depending on your mom's income, the consolidation itself may give you the lowest payment.
Unfortunately, no payment plans under either the federal or private loan products take expenses into account. But if your income is very low right now, your payment for your loans under an income-driven plan will likely be $0. Hopefully, that will help making the overall amounts affordable.
The Parent PLUS loans are your mom's legal responsibility, so if you can't make the payments, make sure you let her know so she can make them and avoid hurting her credit or worse.
[Discover four things borrowers don't always know about parent PLUS loans.]
Q. Is there a service for consolidating student loans for individuals with disabilities? I do not qualify for the Obama Loan Forgiveness Program, nor full-disability status. My disabilities make it difficult to work full time, so I work from home part time.
I have more than $60,000 in student debt and cannot repay at the expected rate, and it continues to grow uncontrollably with interest.
Please let me know if there is an option for me. -Looking for Options for Disabled Borrowers
A. If you are disabled, are on a certain level of Social Security disability and do not make more than the poverty level, you may be eligible to have your federal loans discharged due to total and permanent disability. You can see the full requirements and apply at disabilitydischarge.com -- despite the address, this is actually a Department of Education website.
[Learn about new help available for disabled student loan borrowers.]
If you are not eligible for discharge, I would apply for one of the income-driven repayment plans, such as Revised Pay As You Earn or income-based repayment. You can read about these plans, and find out how much your payment would be under each one, at studentaid.ed.gov.
These plans keep the payments in line with your income and have a forgiveness component after 20 or 25 years, depending on the plan. If you income is very low, you could end up with a payment of zero dollars.
There is no such thing as the "Obama Loan Forgiveness Plan." Any ads or discussions you have with organizations that use this term are usually indicative of a scam. The public service loan forgiveness program was actually written into law under the Bush administration, and forgives the balance of eligible federal student loans for borrowers working in public service after they have made 120 payments.
As you stated, you are not eligible for this, I'm guessing you don't work for a government or eligible nonprofit employer. Those income-driven plans may be your best strategy to prevent default and ensure the loans will be paid off or forgiven.
Allesandra Lanza is the director of corporate public relations for American Student Assistance. She has nearly 20 years of experience in the student loan industry, and has answered students' questions about their federal loans; conducted on-campus loan counseling sessions for students as they enter and exit school; and written about loan repayment, debt management, budgeting and more. Lanza received a B.S. in journalism from Boston University.
