I took out $30,000 in student loans, but now they total $96,000. How is it possible?
Question: I would like advice on how to approach student loan debt. I have no private loans and owe about $96,000. I’m so confused because initially my loans were less than $30,000, but I think the rest is interest. I’m not sure what I’m looking at with my loans. My loans have been suspended and I want to explore loan forgiveness options. I am a school nurse and support my family, so my income is limited. Can you provide direction? It would be greatly appreciated.
To respond: First, let’s look at how a student loan balance can triple, then we’ll look at your loan forgiveness options (good news: being a nurse will probably help). Note that your loans are federal, so you probably don’t want to refinance, as it will rob you of forgiveness options. (Readers with private loans that have high interest rates, however, may want to consider refinancing, as rates are quite low right now.)
How can a student loan balance get so high?
Mark Kantrowitz, student loan expert and author of Who graduated from college? Who doesn’t? said, for the student loan balance to triple, it takes a long period of non-payment that usually requires at least two decades. “It’s not just interest and fees accrued during tuition and grace periods, but also long-term deferments, forfeitures and late payments, as well as collection costs in the event of default” , explains Kantrowitz.
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It is also possible that mistakes were made by the lender. If you suspect a discrepancy in your debt, mistakes do happen, though rarely, and Kantrowitz recommends getting a copy of your full payment history to see why your loan balance has grown so much.
Student Loan Forgiveness Options
The good news is that there are a number of student loan forgiveness programs out there, especially for nurses, especially if you work in an underserved or low-income community, says Michael Kitchen, student debt expert at Student Loan Hero. These programs include the Nurse Corps Loan Repayment Program (NCLRP), the National Health Service Corps (NHSC) Loan Repayment Program, and a variety of state-specific programs. (See some options here.)
“Loan forgiveness options depend on the type of loan. Federal loans may be eligible for Public Service Loan Forgiveness (PSLF) if you work for a public school or a private school that is a 501(c)(3) organization,” Kantrowitz says. “Often these [nursing] The programs require the borrower to work in a specific field, such as for a low-income school district, but there are also loan forgiveness programs for nurses enlisting in the US Armed Forces.
There is also a limited PSLF waiver in effect until October 31, 2022 allowing payments made on loans under the Federal Family Education Loan (FFEL) program to count towards the PSLF if you are working. full-time in eligible employment at the time the payments were made. do, and you consolidate them into a federal consolidation loan. “You will also need to file a PSLF form, either an Employment Certification Form or a Pardon Application, using the PSLF Helper Tool, whether or not your loans are already in the Direct Lending Program,” explains Kantrowitz.
Student loan repayment options
Whether or not you qualify for a rebate, you should convert your loans to an income-oriented repayment plan, which will base loan repayments on your income, not how much you owe. “That should make for a more affordable monthly loan payment,” Kantrowitz says. Even though your payments are probably paused now, you should start considering participating in this program when student loan repayments resume.
On an income-driven repayment plan, your required monthly payments could be as low as $0, and those $0 payments in this scenario count toward the rebate, says financial attorney Leslie H. Tayne. (On an Income Oriented Repayment Plan, after about 20-25 years the rest of your loans may be forgiven.) “Application for an Income Oriented Repayment Plan is free and can be done online directly by you. Once you’re on a plan, you’ll need to recertify your income and family size each year, which could change your monthly payment,” says Tayne.
Since a forbearance increases the loan balance as interest continues to accrue and is added to the loan balance at the end of the forbearance period, ending the forbearance can be helpful if you are able to make payments on the loan. “To end forbearance, the borrower must contact the loan officer and ask,” Kantrowitz explains.