Vicki L. Beam: Finding the right loan repayment program is key

Stephanie Shomin, The Record-Eagle, Traverse City, Mich.
·4 min read

Jul. 5—The Supreme Court decision to strike down President Joe Biden's Loan Forgiveness program has many college graduates looking for guidance on how to pay back their debt. It is important for any college graduate who has a loan balance to review their account and determine when the next payment is due.

Most loans have not had interest accruing or had a required payment since March 2020.

There are many repayment programs available — most are based upon the income you have and if you want to have increasing payments or level payments. The first step is to find your loan servicer and go through the process of choosing the right repayment plan for you.

The Direct Loan Public Service Loan Forgiveness (PSLF) Program is still available to those graduates that qualify.

The PSLF Program was established by Congress with the passage of the College Cost Reduction and Access Act of 2007 and was created to encourage individuals to enter lower-paying but vitally important public sector jobs such as military service, law enforcement, public education and public health professions.

Many jobs in northern Michigan qualify for the loan forgiveness.

The PSLF Program allows eligible borrowers to qualify for forgiveness of the remaining balance of their federal direct loans after they have served full time at a public service organization for at least 10 years, while making 120 qualifying payments.

In order to have any remaining balances on your Direct Loans forgiven under the PSLF Program you must make 120 on-time, full, scheduled, monthly payments on your Direct Loans; make those payments under a qualifying repayment plan and when you make each of those payments, you must be working full-time at a qualifying public service organization.

You can maximize your PSLF benefit, by choosing to repay your loans on the Income-Based Repayment (IBR) Plan, the Pay As You Earn Repayment Plan or the Income Contingent Repayment (ICR) Plan, which are three repayment plans that qualify for PSLF.

Other PSLF-qualifying repayment plans are the 10-Year Standard Repayment Plan or any other repayment plan where your monthly payment amount equals or exceeds what you would pay under a 10-Year Standard Repayment Plan.

Under the IBR, Pay As You Earn and ICR plans, your monthly payment amount will likely be lower than under any of the other PSLF-qualifying repayment plans and your repayment period will likely be longer.

Because of the longer repayment period, additional interest that will accrue on your loan, and the smaller monthly payment amount, you will be left with a higher loan balance that could be forgiven. However, if you ultimately do not meet the eligibility requirements for PSLF, you will be responsible for repaying the entire balance of your loan, including all accrued interest, unless you qualify for forgiveness under the terms of the IBR, Pay As You Earn or ICR repayment plan. You can verify that your employer qualifies for the PSLF by visiting https://studentaid.gov/pslf/employer-search.

For recent high school graduates, now is the time to determine what type of loan is best for them if they have a balance due after any scholarships or grants. The process to obtain the Direct Student Loan begins by accepting the loans at the student's college portal. In addition, each student will need to go to www.studentaid.gov to complete Loan Entrance Counseling as well as the Master Promissory Note.

If the student is still in need of loans to cover the balance due, there are several options to choose from. The Parent Plus Loan is available to apply for. One parent will apply, and if they qualify financially for the loan, they will be able to borrow up to the cost of college less any aid received. It will be their loan until it is paid off.

Many families may opt for a private loan — offered through banks, credit unions and directly at www.salliemae.com. The student will apply for the loan, but will typically need a co-signer for the loan. They can choose to make minimal payments while in college (which will result in a lower interest rate), or defer all payments until six months after leaving college. There is also a choice of a fixed or variable interest rate.

Take advantage of Michigan College Planning's College Planning workshops to learn more about how to reduce stress, save time and potentially money during the college planning process. Visit www.michigancollegeplanning.com or https://www.tcaps.net/programs/leap/for locations and dates. The workshops are informative and include steps you can take right now to assure you understand the cost of attendance and how you can afford college.

If you are unable to attend a workshop, feel free to call Michigan College Planning with your questions.

Vicki L. Beam is a college planner at Michigan College Planning in Traverse City. She encourages questions and comments about future columns. Contact Michigan College Planning at (231) 947-0203, vicki@michigancollegeplanning.com and through www.michigancollegeplanning.com.