Although right now we have the Heals act, a proposal that is likely to be passed. I wanted to go over, the student loan portion of the bill. And break it all down to see which options Are going to be best.
1. What we currently have going on
– With the cares act
– We basically got forbearance on our federal student loans
– Until September 30th ( meaning no interest to be accrued or payments required till then)
– is only 2 months away
– So let’s talk about the new options that are being offered and which one is best
2. The First thing you need to know ( this Is being proposed)
– No income means no payments will be required
– So that’s actually a great thing
– If for whatever reason you don’t have a job, you will have no monthly payments required
– Listen carefully, just because no payments are required doesn’t mean your balance will not accrued interest
– Meaning if you don’t make any payments for a long period of time
– When you do start making payments you could owe a lot more money y
– Let’s say you owe exactly 36k which is the average and your interest is 5.8% which is the average also.
– If you don’t make any payments over 2 years you can go up to 40k
– So the answer, if you do have some hard times right, make sure to get a job and start making payments
Well: Unless you plan on being unemployed for 20 years then your loans will be forgiving undergrad or maybe 25 years and your graduate loans would be forgiving. But that’s a terrible plan obviously.
3. income-based repayment option ( 10% cap if needed)
– now this actually a plan that I like
– it means that you will not have to pay more than 10% of your income towards loans if you don’t want to
– but also gives you the option that if you want to, you can always pay extra
– again say you owe 36k and interest is 5.8% and you earn 52k each year
– it means that they will take 5200 bucks for payments and you get to keep the other 90% for your normal expenses
– btw after 10 years of doing this it means you would have paid a full years salary of 52k which means you would have been don’t with your loans a long time ago ( 8.9 years to be exact )
– realistically the only problem with this plan are two things
– the first is its going to cost you a ton of money in interest around 10k with that example I used.
– When you actually go to apply for a mortgage, they will judge based on that required monthly payment ( debt to income ratio, which could be the different between getting qualified or deinied)
Tip: this is the option I wouldpick, but just add some more cast to finish faster, but I can also go back to 10% if I face some hard times.
4. ten year mortgage-like option
– this is if you are set to pay your student loans in 10 years and you want to make a deadline
– usually if you have the average student loan debt of 36k you would finish faster with the income based if your salary is above 50k
– but this is also a good option
The idea is simple:
– they will organize your monthly payment in a way, where you pay interest and capital
– and it’s guaranteed to be paid off in 10 years
– however again, it doesn’t mean you can pay an extra 100 or 500 bucks per month and finish a lot faster
5. what do I think
– this plan has actually been proposed for over 6 years, this might be the year that this actually past
– I think its better for lenders because it’s going to guarantee them some payments instead of people going in default
– And I think is better for borrowers because it gives them options, legroom, and a clear payment completion date.
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