Skip navigation
1 2 3 Previous Next

Repay Student Debt

103 posts

It’s easy to feel overwhelmed by student loans. As a Salt® student loan counselor, I talk to a lot of people who feel like this. And one thing they commonly ask me is, “What happens to this loan if I die? Will my family get stuck with these payments?”

So, let’s talk about what happens when you die.

 

(Just to your student loans. Don’t worry. I’m not going to bring up religion or philosophy.)

 

An Important Note

 

Debt can easily lead to depression. If you’re struggling financially and emotionally, as a result, please get help right away—and not just with your student loans. There are always options. Call the National Suicide Prevention Lifeline at 800.273.TALK (8255) for support.

 

Death Discharges

 

Death is right near the top of the list of things you’re not “supposed” to talk about, but being concerned about your family is reasonable and responsible—especially if you’re worried about leaving them with a lot of debt. And in this case, the reality is pretty reassuring.

 

Federal student loans are discharged when the borrower passes away. Your family, spouse, or estate would not be responsible for the remaining balance. (They would just need to provide a certified death certificate to the loan servicer.)

 

Private student loans are more complicated. Some lenders offer a death discharge. (Check your loan’s paperwork to see if you loan does.) Beyond that, it depends on whether you had a co-signer or co-borrower, where you live, whether you’re married, even when you got married.

 

But most often, your student loans will not outlive you. Hopefully, this will relieve some of your anxiety.

 

What questions do you have about death discharge for student loans? Sign up or log in with  your Salt account to post them in the comments below.

I hear this a lot as a Salt® student loan counselor—especially this time of year, with borrowers losing their tax refunds to defaulted student loans. The truth is, loan servicers always try to contact you if your loan is delinquent and drifting toward default. Unfortunately, the contact information they have might be out of date.

 

Are you still using the same address, phone number, and email address from when you started school? If not, you might not get the information you need to stay in control of your loans and protect your credit. You can easily fix this, though!

 

Get In Touch With Your Loan Servicer

 

Make sure they’re able to contact you. If you’re not sure how to contact them, go to the National Student Loan Data System (NSLDS®). That’s the federal government’s central database for student loan information. There, you can find out who is servicing all your federal student loans, as well as how much you owe and other important loan details.

 

When They Do Contact You, Pay Attention

 

Now that you know your servicer, be on the lookout for information from them. Check your spam filter once in a while. And if you get a phone call from a number you don’t know? Well, to be honest, I don’t always answer those calls either. But at least listen to the voice mail.

 

“But I don’t need to open all their emails. I’m still in school.” I hear that a lot, too. Maybe they’re emailing you because they don’t know you’re in school. Perhaps you’re just taking one class or “taking a semester off but going back in the fall.” In these cases, you’d be enrolled at less than half-time status. That means your grace period would have already begun, and after that, repayment starts.

 

Know Your Options

 

If you stay informed and in contact, you’ll have a better chance of staying out of default. You have options to pull your loan out of default (rehabilitation, consolidation), or avoid it altogether depending on how late your payments are. But ignoring the situation and your servicer definitely won’t help things.

 

What questions do you have about student loan default? Sign up or log in with your Salt account to post them in the comments.

One of the biggest choices any student has to make about their federal student loans is whether to consolidate or not. Consolidation is a very popular option, but it’s also one that people frequently request without fully understanding the consequences for it.

 

Consolidation allows you to combine multiple federal loans into one big loan. There’s no fee to consolidate online at StudentLoans.gov, so be careful not to pay an unnecessary fee to a third-party debt relief company for this. The consolidation essentially replaces your existing loans with one big, new loan, with an interest rate based on a weighted average of the rates you already have.

 

Why Should I Consolidate?

 

There are plenty of great reasons that people decide to consolidate their loans:

 

  • Simplicity. By the time you finish your education, it’s possible to have many different loans, possibly even spread out among different companies. Consolidation lets you put them together into one place, handled by one servicer.
  • Updating your loan. All new consolidations are through the Direct Loan program. If you have older federal loans and want to apply for Direct loan-only options like Public Service Loan Forgiveness or the Revised Pay As You Earn payment plan, you may need to consolidate into the Direct Loan program.
  • Reducing your standard plan payments. Depending on the amount you consolidate, this option will stretch out the term of the standard payment plan up to a possible maximum of 30 years. This means consolidation will usually lower your monthly payment amount.

All of those look like pretty good benefits!  So, what’s the catch? Each of those benefits carries with it a natural downside, and it’s really up to you whether the downsides will impact you or not.

 

Why Shouldn’t I Consolidate?

 

  • Loss of advanced repayment tactics. Consolidation may make it harder to pay back your loans strategically. For example, if you have multiple loans with different interest rates, it might be possible to make a series of overpayments directly to the highest-interest loans and pay them off quicker than the lower-interest ones, saving you money in the long run. If you consolidate, you only have one loan with one interest rate, so you can’t pursue that strategy.
  • Loss of Perkins loan benefits. Perkins loans are a special kind of federal loan with a few special benefits. They don’t gather interest when you use deferment, and people who work in certain public service areas can qualify for Perkins loan cancellation, which is one of the best forgiveness options out there. Consolidated Perkins loans lose both of these benefits.
  • Payment of more interest on the standard plan. Lower payments may be easier to manage, but it comes at a price. The longer it takes to pay off your loan, the more time there is for interest to build up, which means paying more total over the life of the loan (unless you voluntarily make larger payments than the minimum they’re asking for!).

 

Are you wondering whether you should consolidate your loans? What questions do you have? Sign up or log in with your Salt account to post them in the comments.

My friend Ava (not her real name) graduated from law school with over $200,000 in private student loan debt. Recently, she decided to default on her loans. (What?) She’ll still make small payments toward them, so if the lender sues, she can show that she made an effort.

 

Since she’s married, has two kids, and just bought a home, Ava feels she doesn’t need good credit anymore. Her husband can handle any necessary future borrowing, she said. She is going through with this plan despite my warnings about reneging on her obligations (and not being able to show her face at any Sallie Mae parties).

 

However, my biggest concern for her is that depending on someone else’s credit isn’t always smart—because the unexpected can happen. I know from experience. After 7 years of marriage, I’m currently getting divorced.

 

The Future Is Never Predictable

 

I didn’t expect to be in this position right now (please, no tears). Yeah, it sucks and it’s been stressful, but I’ve had an unexpected ally: my credit score. It has helped me maintain a level of independence and security during this period of upheaval.

 

For instance, I had to refinance my home. I was terrified when I began this process. It was quite a relief when I was told that I’d “easily be approved” due to my credit. (Who would have thought that taking on a mortgage by myself would be the least anxiety-inducing thing happening to me?)

 

Truth is, I’ve been a little obsessed with nurturing my credit score for the last 5 years. I’ve paid my bills on time, declined all those store cards for an extra 10% off, and paid off my credit card every month. That effort rewarded me with a score solidly in the excellent range.

 

Take Care Of Your Score

 

As I’ve learned, you can never know what the future will bring, including when someone will take interest in that credit score of yours. Don’t ignore your score because you’re not married, don’t own a home, or feel secure financially.

 

A decision like Ava’s could hurt you if your car breaks down or is totaled and you need to finance a new one. Or, what if you depend on your spouse for finances, but he or she becomes (God forbid) disabled or passes away? What if you lose out on your dream job or apartment because the background check includes a credit check that you fail miserably?

 

Even the best-laid plans can go awry without warning. So, take it from me. Take care of that credit score. Make sure to:

  • Pay on time every month.
  • Limit the balances you roll over on your credit cards.
  • Don’t accept every credit card offer you receive.
  • Don’t take on more debt than you can handle.

 

These tactics helped build up my score, which got me an awesome rate on my home refinance and is allowing me to avoid moving on top of everything else.

 

Do you have questions about how to build up your credit score or have a personal credit story that others’ might benefit from? Log in or sign up with your Salt account to share it.

A lot of what I talk about here normally focuses on paying down debt responsibly—among other exciting student aid topics. What sometimes gets lost is the need to save money at the same time.

 

Easier said than done, I know! But, we can’t forget to put away money for our future selves. That’s why the Center for Consumer Advocacy at American Student Assistance® (ASA) (the company that powers Salt®) signed up for America Saves Week, which begins February 27.

 

During this week, the organizations that signed up pledge to promote healthy savings behavior. I’m trying to be an overachiever and decided to start a week early! So, here are some ways you can both save for your future goals and make your loan payments.

 

Retirement Savings First

America Saves Week conducted a survey last year that showed that only 52% of respondents were saving enough for retirement to maintain their desired standard of living in their golden years. ASA® also published a study regarding retirement and student debt showing that 73% of respondents put off saving for retirement due to student debt. Yikes!

 

I have two tips for retirement savings: auto-save through your employer (if offered) and take advantage of employer matches. It’s a lot easier to save money if you don’t ever have the option to use that money in a different manner. Many employers offer a 401(k), 403(b), or an IRA option to allow you to deduct money directly from your paycheck before you even get paid. A recent survey showed that 15% of working Americans did not participate in an offered employer-sponsored retirement plan. Use this option!

 

Likewise, if your employer offers to match any of your retirement contributions, take the offer. Always. It’s free money for your future self, but one in four employees who work for a company that offers a retirement match do not take advantage of it, leaving $24 billion on the table!

 

Other Savings

The rule of thumb with savings is to have a goal of between 3 and 9 months of living expenses stashed away for emergencies. How much is right for you? This article has some pretty good guidelines to figure out how much is enough. Now, how do you get there?

 

This is going to sound repetitive, but auto-save! If you have the savings deducted automatically, you are a whole lot more likely to reach your savings goals. And remember, that these are GOALS. You shouldn’t expect to have these lofty amounts within a couple of months.

 

It takes time, so don’t get discouraged if you can only save $10 a month. Any savings is better than no savings. To slightly alter a famous blue fish’s motto: just keep saving, just keep saving, just keep saving, saving, saving …

 

Making Student Loans Work Within Your Budget

Even if you borrowed an overwhelming amount of student loans, federal loans offer repayment options that might work for you to not only cover your debt obligations, but also allow you extra cash. Income-driven repayment (IDR) limits your monthly payments to between 10% and 20% of your discretionary income. These plans also offer forgiveness after 20 or 25 years of eligible payments, depending on the plan (10 if you work for a public service or nonprofit employer).

 

I only recommend using these plans if your normal payments are unmanageable, because you could end up paying more in the long run given the length of time your repaying and the amount of interest accruing. With that being said, these plans can really alleviate financial stress if you are struggling to make your payments and create room for savings priorities.

 

What questions do you have about making room for savings and loan payments? Log in or sign up to let me know!

A few months ago, I wrote a blog post about short-term and long-term options for keeping student loans under control. Today, I’d like to focus one specific option: discretionary forbearance.


It’s not hard to understand why forbearance is such a tempting option for borrowers. After all, it suspends payments on your federal student loans, often for up to 12 months at a time, and can even be used on past-due loans to bring them back into good standing by retroactively “postponing” the payments you missed.


The biggest draw of forbearance, however, is probably the fact that it’s extremely easy to apply for. Other options usually require you to find the correct paperwork, fill it out, and send it in to your servicer, often along with documentation to prove you qualify. With forbearance, most servicers will grant it over the phone. Some will even let you apply for forbearance directly over their website.


So, why would someone decide not to use it? Isn’t this a great deal?


The Downsides Of Forbearance


Your forbearance time is limited. The exact amount varies from loan to loan, but most loans only get about 24-36 months of forbearance total. This means that every month you use up now is a month you won’t have available in the event of a future emergency.


Since forbearance doesn’t keep interest from building up, it can also get very expensive. At the end of the forbearance, any unpaid interest gets added right onto your loan balance. This means that the forbearance actually makes your loan more expensive!


You should also avoid forbearance because there are often better options. If you’re unable to make payments due to low income, you may qualify for an income-driven repayment plan that could reduce your payments to as little as $0.


If income-driven payments don’t suit your situation, there are also numerous ways to qualify for a deferment. Deferment is essentially an improved version of forbearance; it postpones payments as well, but interest only builds up on the unsubsidized portion of loans, and using deferment won’t exhaust your forbearance time (though each deferment may have limits of its own).


When To Use Forbearance


In general, there are usually two times when using forbearance makes sense. First, if you’ve explored all other options and you simply don’t qualify for something else, forbearance is still much better than letting your account fall past due. Just don’t forget that it’s only a temporary option, and you’ll eventually need to find a long-term solution that works for you.

 

Second, if you’re already seriously past due and in danger of default, your servicer may let you bring your account back into good standing through forbearance. Payment is still the best way to bring the account current, but if you can’t afford a large enough payment to avoid default, an over-the-phone forbearance may be the fastest way to bring the account current and avoid default.


What questions do you have about forbearance? Log in or sign up to post them in the comments below—and for a limited time, earn 50 bonus points for doing so!.

Recently, the Consumer Finance Protection Bureau (CFPB) and multiple states’ attorneys general filed lawsuits against Navient, the biggest student loan servicer in the country.

 

Navient services 12 million borrowers and more than $300 billion in student loans—including my own. If you have loans with Navient like me, you might be wondering what the heck you’re supposed to do right now. Do you keep paying? (Yes!) Do your loans go away? (Sorry, no.)

 

To help you figure it all out, here are the facts as they stand now, as well as what your responsibilities still are.

 

Lawsuit Allegations

The CFPB, Illinois attorney general, and the Washington attorney general filed lawsuits against Navient alleging that Navient:

  • Processed payments incorrectly.
  • Steered borrowers to use forbearance instead of counseling borrowers about income-driven repayment (IDR) plans, causing these borrowers to pay more through accruing interest.
  • Deceived private loan borrowers about cosigner release requirements, preventing cosigners from being released from the loans.
  • Misreported default information to the credit reporting agencies for borrowers who received total and permanent disability discharges.
  • Provided bad information to borrowers, which created obstacles for these borrowers to repay effectively.
  • Did not properly respond to borrower complaints.
  • Kicked numerous puppies (just kidding).

 

Navient has denied all of the allegations.

 

What This Means For You

I’m not an attorney and I don’t play one on TV, so I can’t give you any legal advice, but this is a lawsuit with no legal determination or settlement at this point. I can understand why this lawsuit in general would make you uncomfortable or upset if you have loans with Navient (as I do).

 

I’m sure that the allegations will be thoroughly investigated, but right now, they don’t affect the status of your loans or your obligation to repay them. Yes, you MUST keep paying your loans if you want to keep them in good standing. Don’t have a kneejerk reaction and stop paying. This will only hurt your credit or the status of your student loans, not Navient.

 

Next Steps

Again, keep making your payments. If you are concerned that your payments weren’t applied correctly, that you were encouraged to use forbearance without being counseled about IDR plans, or that another aspect of your repayment was mishandled, contact Navient’s Office of the Consumer Advocate at 888.272.5543 or advocate@navient.com. For federal student loans, you can contact the Department of Education Ombudsman at 877.557.2575 or here as well. You can also file a complaint with the CFPB if you feel your loans were not handled appropriately.

 

In the meantime, make sure you continue to educate yourself on your student loan options here with Salt® or the Federal Student Aid (FSA) site. And remember, we’re here to help! What questions do you have about the Navient lawsuit? Log in or sign up to post them in the comments.

This is a hard post to write, as it’s something I’ve thought about (often agonized over) constantly since my student loans went into repayment about 2.5 years ago.

 

I have a lot of student loan debt—like, six figures a lot. While my federal loans are on a standard 10-year repayment plan, I refinanced my private loans to a 20-year repayment plan (with fixed interest) to make my overall monthly payment more affordable.

 

I’m lucky and grateful to have always had a solid job since I graduated from school. It’s made paying my loans back and living like an independent adult possible. While I definitely still feel the hole in my pocket every time the automatic loan payment comes around, I’m finding that the loss hurts less and less as I get more senior in my career.

 

But I didn’t always think like that. In fact, a few years ago, I actually uprooted my life from NYC to move back to Boston, live with my parents, and aggressively pay down my loans. I thought it was the only option I had. Of course, I was wrong. 

 

After living in NYC, living with my parents, and now living in San Francisco, I’ve decided that a long-term student loan repayment strategy works best for me. Here’s what that means, and why I believe in it.

 

Long-Term Repayment Means That I’m Betting On Self Growth

 

I think a lot of existing literature and guidance on student loans doesn’t take into account career and compensation growth, and their impact on repayment. When I had an entry-level salary (2 years ago), living with my parents seemed like the logical option. After reading financial analysis after analysis, I was convinced I could only count on a 2% increase or so in my pay every year—significantly more future income didn’t seem promising.

 

Then, I changed jobs a few times, and now I make considerably more than I did when I graduated school. Within 2 years, I went from living at home to pay my loans, to living alone in a major city, paying my loans, saving/investing money, and having some left over for fun along the way.

 

I am not a special snowflake. The above scenario could conceivably happen to anybody just starting out in a private-sector job—the “growth” years of your career really accelerate your value in the marketplace, especially if you consider job-hopping (more on why this is a must in a future post.)

 

In a nutshell, that’s what long-term repayment boils down to for me—making an educated guess that in the next decade or so of my growth years, my income will grow significantly to the point that my loans become a fraction of my budget, until they’re eventually eliminated.

 

Will My Loans Last The Full Repayment Period?

 

I hope not!  Most of us know the math behind loans—if you take the full term to repay them, you technically end up paying back more than you borrowed due to interest.

 

I may take the full 10 years to repay my federal loans. I very likely will not take the full 20 to repay my private loans. I don’t have a detailed plan fleshed out (I’ve learned that I really can’t have one of those when it comes to student loans), but the rough math involves reallocating the repayment money from my federal loans to my private once the former is paid.

 

I’ll also consider liquidating a non-retirement investment (which I’m building up now) in that time to help eliminate any remaining loans. Refinancing to a shorter repayment term in a few years is also an option.

 

Is Long-Term Repayment Right For Everybody?

 

No. You need to design a student loan plan that works for you to be successful.

 

“Works for you” means two things here. On one hand, you need to make sure your plan is designed around the economic reality of your profession. You may work in a field with high starting pay, but steady year-over-year growth. Or, you may be in a profession that qualifies you for loan forgiveness after 10 years. All of these factors need to be taken into account.

 

On the other hand, you need to make a choice that maximizes your personal happiness. Believe me when I say (from experience) that sacrificing your personal and professional dreams just to pay off your student loans faster is not worth it.

 

While I actually enjoyed my year at home with my family, I often look back and think about what would’ve happened if I had stayed in New York instead: what new things I may have discovered about myself, lessons I may have learned earlier, and achievements I may have accomplished.

 

Student loans already require you to sacrifice a bit of your freedom every month; don’t let them take all of it.

 

Agree with my views? Vehemently disagree? Either way, log in or sign up to let me know in the comments! 

Welcome to 2017, aka the first year student loan borrowers will become eligible for Public Service Loan Forgiveness (PSLF)!

 

Because September is the first time you can apply for this program, I thought now would be the perfect time to make sure everyone understands some key aspects of the program—and some reasons it may not always make sense for you.

 

PSLF Eligibility Requirements

 

It has been estimated that a quarter of the U.S. workforce is employed by a nonprofit or public employer. However, you need to meet a few more eligibility requirements to have your remaining federal student loan balance forgiven. You must:

 

You can consolidate non-eligible federal loans to become eligible for the program, and you can change your repayment plan to start making eligible payments. But should you? When making these changes, you’ll want to fully understand what you’re doing before moving forward.

 

Does PSLF Make Financial Sense?

 

At first glance, it may seem like a no-brainer to consolidate or apply for an income-driven repayment (IDR) plan to take advantage of PSLF if you work for an eligible employer. That isn’t always the case.

 

Consolidating starts the clock over on repayment. Any payments you’ve made previously won’t count toward the necessary 120 for forgiveness. If you’ve already made years of payments, you might pay more over the next 10 years than you would have if you didn’t consolidate to become eligible for forgiveness.

 

Likewise, if you switch to an IDR plan after making years of payments that aren’t eligible for PSLF, you might end up paying more over the subsequent 10 years than you would have otherwise.

 

Doing The Math

 

Here’s an example: You borrowed $55,000 in the Federal Family Education Loan Program (FFELP) with a 6.8% interest rate. If you repaid it in 10 years under the standard plan, you’d pay $633 per month for a total of $75,953.

 

Now, let’s say you made 6 years of payments ($53,172 paid; $20,043 remaining balance) and then consolidated into Direct loans to become eligible for PSLF. If your adjusted gross income (AGI) is $35,000, you’ll pay $24,360 over the next 10 years under the REPAYE plan. At $143 per month, you’ll pay $69,936 overall and receive $6,063 in forgiveness.

 

In this example, you’ll pay less than if you repaid your debt fully under the standard plan. However, you will also make payments for 16 years instead of just 10. Even at a lower amount, that may take a toll on your monthly budget. If you consolidated any later, you’d repay more than the standard plan you were originally on.

 

If you were already in the Direct loan program, your standard payments would count toward PSLF, but you’d pay the loan off in 10 years. In this case, if you switched to REPAYE at any time, you’d pay less and only pay for a total of 10 years, maximizing your forgiveness eligibility.

 

Use this calculator to determine if working toward PSLF makes financial sense for you. And if you want to learn more about PSLF, check out this video presentation that goes into PSLF in detail.

 

What questions do you have about PSLF? Are you having difficulty deciding if applying for PSLF makes sense for you? Log in or sign up for the community to leave a comment and let me know!

In the past, we’ve warned our readers about some not-so-nice tactics practiced by some debt relief companies. Recently, one of these companies has begun a new campaign that’s making me cringe—which is why I wanted to make sure that you don’t get alarmed if you receive their message.

 

Uncertainty Brings Opportunity

There’s a lot of uncertainty about all areas of our government with a new president taking office soon, and a republican majority in both houses of congress. When it comes to student loans, a company is trying to capitalize on this ambiguity. They’re calling student loan borrowers and telling them that student loan forgiveness will be eliminated upon President-elect Trump’s inauguration. They’re even telling borrowers that they must act within 24 hours to take advantage of the program to avoid losing the benefit completely. You can read about it in detail here.

 

Talk To Trusted Sources First

Before believing anyone who calls you, talk to a trusted source. Salt® is here to give you impartial advice on your loans, and we have some great folks who devote themselves to having their fingers on the pulse of any changes in higher education financing. You can also speak to your loan servicer directly for more information. And don’t worry that your servicer won’t want you to take advantage of forgiveness. The federal government backs federal loans, so amounts that are forgiven don’t affect your loan holder’s bottom line. Your services has nothing to lose by allowing you to pursue a forgiveness program, so talk to them!

 

What Will The Future Really Bring?

Whenever I’m asked about how the government will act on higher education topics in the future, I always begin with “my crystal ball is foggy, but …” and today is no different. There are no guarantees in life, right? But, student loan forgiveness can’t be wiped away as soon as Trump (or any new president) enters office. Current borrowers are 99.9% guaranteed to be grandfathered in to the current benefits they signed up for—so, it’s safe to exhale now.

 

On a more serious note, my educated opinion (based on 10 years of working in this biz) is that getting rid of student loan forgiveness entirely would be an unprecedented move. Could new borrowers face limited or no student loan forgiveness? Yes. In fact, there are many pieces of legislation that have been introduced in both the House and the Senate in the last few years that propose just that. But none of them have gotten very far—yet. I predict that we will see a cap on forgiveness in the future, but that will be unlikely to affect current borrowers.

 

Have you received a call like this, or a similar one that has you worried about how to handle your loans? Are you anxious about changes to federal loan legislation that could come with the changing administration? Share your thoughts in the comments!

Many Salt® readers have student loans, and they would love to pay this debt down as quickly as possible. Outside help can speed up that process, and with the holidays in full swing, this may be the perfect time to tell generous friends and family to stop giving you stuff.

Instead, ask them to give you the gift of financial independence by helping pay down your debt. To ensure they don’t have any hiccups when “wrapping” this gift, here are a couple tips to keep in mind.

Sending Money Directly Isn’t That Easy

If grandma wants to put money toward your student loans by giving it directly to your loan servicer, things might get tricky. There’s this “pesky” law out there called the Family Education Rights and Privacy Act (FERPA). This law ensures your privacy when it comes to your student loans, but it also means that grandma can’t just call up your servicer to get your loan information to pay it down. In fact, the loan servicer likely won’t even acknowledge that you have debt with them. If your grandma is anything like mine, this will thoroughly confuse her.

The solution to this is to provide your account number to anyone interested in paying your servicer directly. They can then send a check with your account number right on it or pay over the phone using that number without needing more information.

If your loved one wants to pay online, there likely isn’t a good solution. To pay online, they would need your account’s log in information, and that really isn’t a smart thing to give out—even to grandma. Either ask the person to send a check or give you the money directly. Which leads me to ...

Be Responsible

If you ask for money to pay down your student loans for the holidays, make sure you actually use it for your student loans. We’ve all been guilty of having good intentions for a pot of money, but then not putting it to good use. Did you really use all of that money from mom and dad for books and supplies like they asked you to? Come on, every time?

Setting up a specific savings account for family and friends to deposit these funds might keep you on track. They can transfer the money directly into that account for you, and you will (hopefully) be more likely to send the money directly to your loan servicers since it’s separate from your other expenses.

Have you thought about asking for money instead of gifts to pay down your loans? Do you like this idea? Why or why not? Log in or sign up for a community account to share your thoughts and ask any other questions you have about loan repayment.

You may have heard about the Defense to Repayment (DTR) student loan discharge in the news lately. DTR forgives your federal student loan debt if your college defrauded you or violated state consumer protection laws, which affected educational programs or employment opportunities. 

This discharge isn’t new, but it has rarely been used, and no clear procedures were ever published until now. But, even with these new procedures, there’s still a lot of confusion about DTR. I’m going to try to give you the most important details.

DTR Eligibility

How to be eligible first hinges upon what type of loans you have, and when you borrowed them. Here’s a quick cheat sheet:

Current Direct Loan (DL) Borrowers

You must prove that your school defrauded you via state consumer protection laws. Examples include:

  • Inflating job placement rates in publications.
  • Advising that your credits were transferable when they weren’t.
  • Claiming faculty held certifications when they did not.

Federal Family Education Loan (FFEL) Borrowers

You’ll need to prove that your school defrauded you via state consumer protection laws as well as had an improper relationship with your lender.

DL Borrowers As Of July 1, 2017

You must prove that the school is in breach of contract, has been found at fault in a contested judgment, or has substantially misrepresented itself in writing or verbally. This includes omitting information.  What was written, said, or omitted must be severe enough that a reasonable person would have relied on it and did so to his or her disadvantage.

You will have more protections under this rule. If you have older loans, you can consolidate them to take advantage of these new protections.

In all instances, the fraud must have taken place while you were attending the school and directly relate to your loans or educational services. Personal injury or harassment claims are not eligible. It must also be based on false claims, not how your specific experience turned out.

Example Situations

It still might not be crystal clear what would and wouldn’t be eligible for a DTR discharge. Here are some examples of eligible and ineligible situations.

DTR-eligible situations include:

  • The school advertised that its faculty was certified in their field, but many were not.
  • The school made claims that the average starting salary after graduation was $100,000, when the average was closer to $25,000.
  • The advertisements for your program or school guaranteed 100% employment after graduation, when a high percentage of graduates could not find employment in their field.
  • The program you enrolled in claimed to provide you with the certification necessary for a specific field of work, and it did not meet the necessary standards to get a job in that field.

  DTR-ineligible situations include: 

  • The school advertised an average starting salary of $100,000, the rate was proven accurate, but your starting salary was much less.
  • The school made claims that over 90% of graduates in your program get jobs in their field, the rate was proven accurate, but you were not able to find employment within your first year of graduation.
  • You were unhappy with your education, program, school, or faculty.

How To Apply

If you currently have loans and think you may be eligible, you can apply at any time by emailing or mailing your claims with documentation to FSAOperations@ed.gov or U.S. Department of Education, PO Box 429060, San Francisco, CA 94142. You can find a complete list of materials to include in your submission here.

You can also wait until after July 1, 2017, to apply to allow for the new rules to kick in. You can then consolidate into DL to apply with the less strict qualifications. There are pros and cons to consolidation, but if you are a FFELP borrower, you can have ED review your DTR claim before consolidating. ED will let you know whether you will qualify under the less strict DL provisions. If you do, you can consolidate at that point into DL, to take advantage of the new rules.

What questions do you have about DTR?

At Salt®, we believe that the education benefits offered to servicemembers and veterans shouldn’t be camouflaged. So, we have decided to dedicate the month of November (because November 11 is Veterans Day) to help educate those who are or who have served in the U.S. Armed Forces about how they can pay for their college educations or manage their student loans.

During November, the Salt Community will feature guest bloggers who have either used a military educational benefit or administered some of these programs at the institutional level to help readers understand these programs a little more.

To kick off the month, I thought I would highlight a couple of educational programs you may want to know about if you are currently or formerly served in the military.

Paying For College

The military offers programs to help pay for college while serving and after your service has ended. There is tuition assistance offered to active duty members by every military branch that will cover up to full tuition depending on the branch and how long you have served.

The Post-9/11 GI Bill offers servicemembers, veterans, and/or their families up to the full cost of tuition at public schools and offers up to $21,970.46 for private or foreign schools a year. You can bridge the gap in the cost of tuition at these schools with the Yellow Ribbon program if you attend a participating school.

Repaying Student Loans

Borrowed student loans and you’re a servicemember? The Department of Defense offers student loan repayment programs for the Army, Air Force, and Navy. Eligibility varies depending on military branch, but all offer up to 33 1/3% of your student loan balance forgiven up to $65,000 total ($10,000 for the Air Force).

There are also ways to have your interest rate lowered if you are actively serving on your federal student loans, and in some cases, other commercial debt. The Servicemember Civil Relief Act (SCRA) limits your interest rate to 6% for all commercial debt and federal student loans that you borrowed before your eligible active duty began.

If your loans are in default, the collection costs and late fees are also included in that 6%, which can save you a lot of money considering default fees can be over 18%. This limitation should be applied automatically to your federal loans, but if it isn’t, use this form to get the interest rate reduction. You’ll need to contact other lenders directly to ensure your interest rates are changed appropriately.

Direct loans borrowed after October 1, 2008, are eligible for a 0% interest rate for up to 5 years when you are receiving hostile area pay.

State Programs

There are many more programs that you may be able to take advantage of. Most states offer programs to help servicemembers, veterans, and their families go to college or repay their student loans. You can find more information about them here.

This was a pretty quick summary of the many programs out there designed to assist servicemembers and veterans go to college or repay their student debt. Stay tuned for more information over the coming weeks. But in the meantime, what questions do you have about financing your education?

Salt® and American Student Assistance® (ASA), the organization that powers Salt, recently conducted a survey in which 62% of respondents said they’d delayed saving for retirement due to student loans. Wells Fargo surveyed millennials about saving for retirement as well, and they found that though 69% thought that saving for retirement was important, only 52% had a retirement savings account.

With this in mind, I thought it was a good time to talk a little about how you can balance paying down your student loan debt and saving for retirement—which are both pretty important financial goals.

The “B” Word

Yes, you need to budget. I know many are scared of it, but it doesn’t have to be frightening. Try using Salt’s budgeting worksheet to start.

Once you identify where your money has to go every month, you can review your previous months’ spending to see where your money has been going and might not need to. When you are comfortable with your discretionary spending, you can determine how much you want to save toward retirement while paying down your student loans.

Retirement Savings Tips

I know. I made it sound too easy, but it doesn’t have to be too hard either!

If your employer matches some or all of your retirement contributions, you are already ahead of the game. If you aren’t taking advantage of an employer match, you are throwing away free money. Don’t do that!

I also recommend that whenever you get a raise, whether it is an annual increase, a promotion, or a new job, increase your retirement savings at the same time. That way, it doesn’t affect your current budget. You don’t have to give your future self all of the raise, but if you get an annual 3% raise, increase your retirement contribution 1% to 2%. You still get more money per paycheck, and you give your future self some extra cash too.

You can find many other ideas by searching online, such as downsizing, moving overseas, or making small lifestyle changes.

Income-Driven Repayment

What happens when your budget just can’t cut it? If your bills are too high compared to your income, see how an income-driven repayment (IDR) plan could help. You can estimate your payments here. They will be based on your income and family size and can be as low as $0 each month. After 20 or 25 years (10 if you work for a public service or nonprofit employer), your balance would be forgiven but that amount would be taxable.

The benefit to this option is that you may be able to cover your student debt obligations while making more room in your budget to save for retirement. Keep in mind that you want to be sure that you aren’t just making your loan more expensive in the long run, which really doesn’t save you any money. If you foresee your income remaining pretty steady and your payments are currently very low, it might be a good option to choose to make room in your budget to save more.

What questions do you have about saving for retirement while paying down your student loans?

Back when I was in school, I had to take a leave of absence to take care of my mom. A few months into it, my loan servicer called saying my loans were past due. I was upset and argued with them. I hadn’t graduated yet, so my payments couldn’t be due, let alone delinquent, right? Wrong.

After talking with my servicer, they put my loans in forbearance over the phone. This brought my account current and postponed my payments for the next 12 months. So, for a year, I thought I was all set and didn’t have to worry about any payments.

This was not a smart choice.

I should have looked into other postponement options, such as an economic hardship deferment. Since I had some subsidized loans, the government would have covered the interest accruing on them during an approved deferment. Whereas, with the forbearance, all the interest was my responsibility. To make matters worse, any interest that accrued would be added to my principal balance—making my payments even more expensive. And that is exactly what happened.

I also ended up using all my forbearance time, another bad move. Forbearance is granted 12 months at a time, but the maximum amount of time is limited. It’s usually 24 to 36 months, depending on your lender. For this reason and the increasing loan balance, you should use forbearance sparingly, like in cases of emergency or if you don’t qualify for any other option.

Here are some other tips to avoid making my mistakes:

1. Before postponing your payments, see how much they could be under an income-driven repayment plan. These plans can offer payments as little as $0 (the same due as under a postponement) while allowing you to hang onto your limited deferment or forbearance time.

2. The convenience of requesting forbearance over the phone, without having to fill out any paperwork, can be tempting—especially if you’re dealing with other financial or personal issues. So, if you are not able to make your payments, make sure you know all your options before you decide to postpone them with a forbearance.

3. If you have to postpone your payments, see if you are eligible for a deferment first.

4. There are various deferments, each with certain criteria. For example, if you are unemployed and you are seeking full-time work, find out whether you qualify for an unemployment deferment first. If you don’t qualify, try looking into the economic hardship deferment.

5. If you do postpone, try to make some form of payment, maybe just to cover the interest. If that is not feasible, try a lesser amount, which can help you out in the long run.

What questions do you have about using deferment and forbearance?