The process of choosing a federal student loan repayment plan can be daunting. To help borrowers better understand and compare their repayment options, the U.S. Department of Education recently enhanced its Loan Simulator tool.
You can use this free online resource as a personalized guide to exploring strategies to pay back your student loans. Remember, however, that it is intended for informational purposes and does not guarantee future loan payments with 100% accuracy.
To start using the tool, you can either log in using your Federal Student Aid ID, known as your FSA ID, which will autopopulate your information, or manually enter your details. Because it’s using your specific information — including your salary and the balance and interest rate for each of your student loans — the Loan Simulator provides individualized tips based on your particular financial situation and goals.
You can explore three separate modules in the Loan Simulator:
— Compare repayment plan options to reach specific goals.
— Explore options for lowering or pausing monthly payments.
— Simulate the impact of borrowing additional student loans.
Compare Repayment Plan Options to Reach Specific Goals
This module allows you to analyze your repayment options based on your short- and long-term financial goals. You can also manually enter your information or use sample loan amounts based on national or college-level averages.
After a few basic preliminary questions, you can choose from a menu of repayment goals to customize your options. These goals include: pay off my loans as quickly as possible; have a low monthly payment; pay the lowest total amount over time; choose my monthly payment; pay off my loans by a certain date; or no specific goal.
Next, the tool will show you which repayment plan is the best fit for the goal you chose. For the selected plan, you can see your estimated monthly payments, the estimated total you’ll pay over the life of the loan, your expected payoff date and, if you’re planning to apply for Public Service Loan Forgiveness, your estimated forgiveness amount.
You can click through additional options and compare estimates of your monthly payments under each plan, as well as what you could expect to pay in total over the life of the loan. You can also toggle back and forth between different goals to make an easy comparison.
The Loan Simulator also shows you how each plan would affect you if you’re enrolled in PSLF and will flag whether a certain repayment plan is a good option for those seeking to use this forgiveness program. You can also explore whether consolidating your student loans might be a good move.
Explore Options for Lowering or Pausing Monthly Payments
Another module in the Loan Simulator helps you navigate your options for lowering or pausing your monthly payments if you’re struggling to make them . Based on your situation, the tool outlines the pros and cons of different options, including enrolling in income-driven repayment or applying for a deferment or forbearance.
For each option, the tool indicates whether that option pauses payments or just lowers them, whether it provides interest subsidy benefits or counts toward loan forgiveness programs, and whether it’s a long-term solution — such as enrolling in an income-driven repayment plan — or a shorter-term fix such as temporarily pausing monthly payments via a deferment or forbearance.
Like with the repayment plan estimator, you can toggle between choices to easily compare different scenarios.
Simulate the Impact of Borrowing Additional Student Loans
The Loan Simulator’s third and newest module, introduced in November 2020, simulates how borrowing additional federal student loans would affect your total loan balance and repayment options.
In this module, you can enter details on the type of program you’d be borrowing more money for — whether that’s for a current or future program of study — and the amount you’re thinking about borrowing. The module will then show what that additional borrowing would mean for your repayment, including how much it would add to your total loan balance and how it would affect your monthly payments under different repayment scenarios.
This module also includes helpful tips on how to pay less over the life of your loan, how interest capitalization will affect your balance and how to find details on your school’s net price.
While student loan repayment can be confusing, the Loan Simulator can help you decide which repayment options are best for you, how to find relief if you’re struggling to make payments and how your repayment plan could be affected if you decided to take out more loans.
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