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Are your monthly debt payments preventing you from reaching financial goals like buying a home? You’re not alone. See how you can reduce your debt and lower your student loan balance to achieve the American dream o (iStock)
Homeownership can be a stable way to build lasting wealth while just paying for your living expenses. But buying a home can be difficult for borrowers with other significant financial obligations, such as a student loan.
Student loan debt has kept 35% of millennial borrowers from buying homes, says new survey from the National Association of Realtors (NAR). It also had an impact on homeownership among other generations; a fifth (19%) of baby boomers said that student debt had kept them from buying a home.
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Fortunately, there are several ways you can make your student loan debt more manageable so that you can reach your financial goals. Consider your options such as income-driven repayment plans and student loan refinancing in the analysis below.
If you do decide to refinance your student loan debt, be sure to compare the interest rates of several lenders to ensure you are getting the best possible interest rate for your financial situation. You can compare rates in minutes without impacting your credit score on Credible.
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Student loans influence borrowers’ financial decisions
Clearly, student loan repayments can stand in the way of the American dream of homeownership. Almost 30% of all borrowers surveyed said their student loan debt prevented them from getting a home loan.
Of all student loan borrowers who do not yet own a home, more than half (51%) said student loan debt prevents them from accessing homeownership, and about three-quarters (72%) have said student loan debts will delay them from buying. a house. Of current homeowners, half (50%) said student debt was delaying the purchase of their home.
The financial impact of student loans doesn’t stop there, however. More than a third (35%) of borrowers said their college debt prevented them from taking vacations. About 3 in 10 respondents said that student debt had an impact on their decision to buy a car or pursue post-secondary education.
The financial impact of student debt varies from generation to generation. For example, 22% of Gen Z borrowers said their college debt prevented them from renting on their own and leaving their parents ‘or guardians’ homes. It has prevented 29% of millennials from starting a small business.
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3 Ways To Make Student Loan Debt More Manageable
You don’t have to sacrifice your financial well-being while paying off your student loans. There are many ways you can pay off your loans faster, lower your monthly payments, and maybe even have your student loan debt paid off in full.
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1. Refinance your student loans at a lower rate
Refinancing a student loan involves taking out a new loan to pay off your current student loans on better terms. Now is a great time to refinance your college debt, as student loan refinancing rates continue to hover near all-time lows, data from Credible shows.
By refinancing at a lower interest rate, you may be able to pay off your debt faster or even lower your monthly payments. Well-qualified borrowers who refinanced to a long-term loan on Credible saved over $ 250 on their monthly payments, while those who refinanced to a shorter-term loan saved years on their student loan repayment and saved nearly $ 17,000 in interest.
Keep in mind that refinancing your federal student loans into a private student loan may give you a lower interest rate, but you will lose federal benefits such as emergency COVID-19 forbearance plans, Income Based Repayment (IDR) and even a possible student loan forgiveness.
Not sure if refinancing is right for you? Browse student loan rates from real private lenders in the table below and use Credible’s student loan calculator to see how much you can save.
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2. Enroll in an income-based repayment plan or request additional forbearance
Federal student loan borrowers can enroll in Income-Based Repayment (IDR), which limits your student loan payments to about 10-20% of your disposable income. You can subscribe to an IDR plan on Federal Student Aid Office (FSA) website.
Federal student loan forbearance is ending soon and payments will resume in February 2022. Yet many borrowers are still not ready to resume federal student loan payments. Eligible federal borrowers may be eligible for a suspension of payments for an additional 36 months up to postponement of economic difficulties Where postponement of unemployment.
If you have private loans, you may be able to apply for hardship forbearance. Keep in mind that each lender has their own set of deferral eligibility requirements.
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3. Look for student loan cancellation programs like PSLF and Borrower Defense
The Education Department has written off nearly $ 10 billion in student loan debt for more than 563,000 borrowers since President Joe Biden took office. But that’s only a fraction of the 45 million student loan borrowers who owe $ 1.7 trillion in student loan debt.
The Biden administration has made it easier for borrowers to get their student loans canceled through the Total and Permanent Disability (TPD) Release Program and the Closed Schools Release Program. But if you don’t qualify for these programs, consider other student loan forgiveness options:
Even if you don’t qualify for your student loan waiver, you still have options to make your student loan debt more manageable. Contact a knowledgeable loan officer at Credible to explore your student loan repayment options, including refinancing.
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Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.
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