Have you looked at ways to reduce your student loan payment?

Changing the world and improving society may not always be lucrative, but the federal government has ways to make loan payments affordable—even for those working in the private sector. The option most talked about is the Public Service Loan Forgiveness program, but other tools are available as well.

Student loans, by default, are repaid on a standard repayment plan with 120 payments: You pay the bill each month, and the principal and interest is paid off in 10 years. If you work for a nonprofit organization or government agency, it’s possible for your monthly payments to be reduced or eliminated and then stopped after 10 years through the Public Service Loan Forgiveness program.

There’s one important catch: Only direct loans from the U.S. Department of Education are eligible for Public Service Loan Forgiveness:

  1. Only student loans made under the Direct Loan program (i.e., loaned directly from the U.S. Department of Education) are eligible for loan forgiveness. These include Federal Direct Stafford Loans (Subsidized Loans), Federal Direct Unsubsidized Stafford Loans (Unsubsidized Loans), Federal Direct PLUS Loans for parents and graduate students, and Federal Direct Consolidation Loans.
  2. Since July 1, 2010, all student loans from Syracuse University are direct loans. Prior to this change, federal student loans for Syracuse University students were made by private lenders under the Federal Family Education Loan (FFEL) Program. Student loans made under the FFEL program are not eligible for Public Service Loan Forgiveness.
  3. FFEL loans, however, can become eligible for Public Service Loan Forgiveness if they are consolidated into a Federal Direct Consolidation Loan. From January 1 through June 30, 2012, there is also a Special Direct Consolidation Program with slightly different terms for individuals with both direct loans and FFEL loans.

Not eligible? Working in the private sector? That’s OK! In addition to the Public Service Loan Forgiveness program, there are other options available to help reduce your monthly payment:

  • Extend the payment term to more than 10 years. The monthly payment will then be lower, but you’ll end up paying more in interest.
  • Pay your student loan with automatic electronic payments. Some loans offer a discount for payments made this way.
  • Utilize an income-based repayment plan to have a monthly payment based on your income and family size. After 25 years, whatever is left on loan will be forgiven (i.e., you don’t have to pay it back) no matter where you work. (If you quality for the Public Service Loan Forgiveness program, the loan is forgiven after 10 years of payments.)
  • Similarly, income contingent repayments are recalculated each year based on your adjusted gross income.  After 25 years, whatever is left on loan will be forgiven (i.e., you don’t have to pay it back) no matter where you work. (If you quality for the Public Service Loan Forgiveness program, the loan is forgiven after 10 years of payments.)
  • As a last resort, explore options to postpone making payments. Interest on the loan will grow, and you’ll end up paying back more in the long run. This option, however, is much better than the consequences of skipping payments.

Everyone’s financial circumstances are different. When deciding how to best pay back your student loans, be sure to consider your present and future finances. What makes sense for one Maxwell graduate may not work for another. For more information about student loan repayment or for more individualized information, please contact your student loan provider or servicer, the Federal Student Aid Information Center, the Syracuse University financial aid office, or your financial advisor.

Please note: The above information is provided as a courtesy by the Maxwell School’s Office of Career Development and Alumni Relations to help raise awareness of student loan repayment options, so please do not view it as expert financial advice.

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