Starting Oct. 1, holders of student debt will have to resume payments, but the interest is already starting to accrue.
That’s why the founder and executive director of a nonprofit designed to help people tackle their student debt said it’s so important to take action now.
“The biggest mistake is taking a passive approach to this,” said Tisa Silver Canady, with the Maryland Center for Collegiate Financial Wellness.
Many people resuming their student loan payments, or those making payments for the first time, may not even know who is servicing their loans. In that case, Silver Canady advises going to the Federal Student Aid website “to make sure that you know where all of your loans are and who all the servicers are.”
Silver Canady said she’s worked with people who have as little as a few thousand dollars in loans to those that are nearly half-a-million dollars in debt. “Most of the people that I work with owe upwards of $60,000-$70,000,” said Silver Canady.
One thing she tries to drive home is that there are options, especially for those with federal loans. “Right now, there are eight different repayment plans, and there are different ways you can go about repayment to save yourself money,” Silver Canady said.
Among the ways that borrowers can manage their monthly payments: applying for an income-driven loan repayment plan.
“These are payment plans that allow a borrower to have a monthly payment that’s based on their household earnings and other characteristics, like the number of dependents they have, instead of just paying solely upon the balance that is owed,” said Silver Canady.
In one case that Silver Canady worked on, a borrower faced a possible payment of $4,000 a month “and there is no way that she can repay that.”
So, they worked to get an income-driven plan that would drop that payment to as low as $100 a month. “And that’s a huge difference,” said Silver Canady.
She added that mot all student-loan holders are in their 20s and 30s.
Silver Canady said, “Believe it or not, most of the people that I’ve met with in the past, I’ll say, six weeks, are over the age of 60 and carrying at least $40,000 to $50,000 in student loan debt” from loans that were taken out nearly 20 years ago.
In some of those cases, the borrowers, who ran into trouble in repaying their loans, were counseled to move into “forbearance,” giving them the ability to pause payments.
“But interest is accruing the entire time,” said Silver Canady, adding that when those clients resumed payments, they found their debt had grown.
And in those cases, she’s heard people tell her they thought they’d be taking their debts to their graves. “As many times as I’ve heard it, it’s like a gut punch every single time,” said Silver Canady, because those clients would otherwise be able to retire “and enjoy some freedom.”
Along with contacting their loan servicers, Silver Canady said Maryland residents who run into problems can contact the state’s student loan ombudsman in the Department of Labor.
Once repayment resumes, if they run into trouble with their loan servicer, “they might want to loop in the ombudsman to potentially open up an investigation or help them arrive at a resolution,” said Silver Canady.
