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Almost 44 million Americans have had their student loans in deferment since March 2020. Those payments will start up again the end of this summer – around September 1, 2023. Many of these borrowers have not had to budget for the student loan payments, possibly creating some real challenges. There is fear that student loan delinquencies will jump to 10% or more. What can you do if you are one of these borrowers that need to start paying? There are some options.

Unless the U.S. Supreme Court unexpectedly rules in favor of the Biden’s Administration’s loan forgiveness program, student loans will be an extra heavy burden for many borrowers. Many borrowers have dropped out of school, but yet still have to pay their student loans back. The day of reckoning is fast approaching. An estimated 18 Billion dollars in payments will be made each month.

Oftentimes, refinancing the multiple student loans into one provides a better opportunity to lower the monthly payment. You need to ask if the student loan consolidation will push out the term of the student debt.

Another option is to refinance the student loans into your mortgage if you have sufficient equity. The good side of this option is the major lenders consider this as a “Mortgage Balance Refinance” which is a lot cheaper than the “Cash-out Refinance”. The bad side is your current first mortgage may have a really good interest rate from refinancing a few years ago, and interest rates today are much higher.

The Graduated Repayment Plan allows a payment that starts out lower and then increases every two years. The loans term remains at t10 years. It just starts off with lower payments and ends with much higher payments.

The Extended Repayment Plan allows the term of student loans to be up to 25 years. This allows lower payments, at the expense of having payments over a longer period of time. You will pay more interest over that time frame, but it may be a better option if you cannot handle the current payment.

There are the income repayment options including a couple of income repayment programs such as Pay As You Earn Repayment Plan. This keeps your payment at 10% of your discretionary income.  The Income-Based Repayment Plan keeps payment under 15% of your discretionary income. Payments are recalculated each year based on income and family size.  

There are some options and it best to contact your loan servicer as soon as possible because the longer you wait, the more difficult it could become to try to reach someone as that September 1, 2023 date is fast approaching.

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