Balancing a monthly budget when you have student loan payments, plus other household expenses, can be stressful. But you may be able to relieve some of that burden and reduce your monthly student loan payments with various federal repayment options or refinancing.
Public school teachers with federal student loans may qualify for income-driven repayment options. These repayment plans are based on level of income. So, lower levels of income could mean lower monthly payments.
Another option is refinancing existing loans at lower interest rates. Refinancing may help educators who don't qualify for federal loan forgiveness programs, won't benefit from income-driven repayment options or have private student loans.
Repayments plan vs. refinance
Sarah, a second grade teacher, has $37,700 in student loan debt. With a salary of $36,000, Sarah chooses to move from the standard repayment plan to an income-driven repayment plan and saves $220 in monthly payments.
Justin, a high school guidance counselor, has $105,000 in student loan debt with a 9.25%* interest rate. Justin would not benefit from an income-driven repayment plan. He chooses to refinance at a lower interest rate (2.53%). Due to the lower interest rate, Justin saves $356 in monthly payments.
Please note that these scenarios are hypothetical and for illustrative purposes only. It's important to consider that refinancing a federal student loan will make the borrower ineligible for loan forgiveness programs and could lengthen the repayment period of the loan. Generally, when you make lower payments or extend your repayment period, you will pay more in interest over time.
Which one is best for you?
Student loan payment reduction options can be confusing to navigate and may not work for everyone. You may want to consider working with an expert in the profession. For example, companies offers free Student Loan Solutions workshops to explain the different programs.
* Average private loan interest rates are typically 9-12%. Refinancing rates are typically 2-9%.
Horace Mann Solutions