By Daniel Preziosi

At the end of May, Stonebridge Financial Group had the pleasure of hosting Mackenzie Ellis from GradFin, which provides debt reduction solutions to student loan borrowers. Mackenzie covered many topics relating to student loans and provided excellent insight into their intricacies. Here are five takeaways from her presentation.

1. Borrowers often fail to grasp their debt load

On average, undergraduates have six to 12 student loans by the time of graduation, and current U.S. student loan debt totals about $1.6 trillion. Despite these staggering figures, 90% of borrowers do not even know the current interest rates on their loans.

2. The CARES act has presented some student loan relief

The U.S. Senate has suspended all federal loan payments until Sept. 30, 2021, with interest rates waived to 0%, although borrowers can continue to make payments if they want to. Private loans are not eligible to be suspended. We may see some student loan forgiveness under the Biden administration soon, but details are unclear, and forgiveness likely will be based on the borrower’s income.

3. Great variety exists among student loans

Student loan types can vary greatly depending on whether the borrower is pursuing an undergraduate degree or graduate degree, whether the student’s parents are the borrowers, or whether the borrower is getting a federal or private loan. It is important to understand all avenues when securing a student loan. There is usually little to no negotiating room for private loan rates.

4. Opportunities are available in the current interest rate environment

Student loan rates can vary greatly depending on loan type and disbursement dates of the loan. Rates on graduate degree loans can be significantly higher than undergraduate degree rates. Current interest rates are at record lows for federal loans, but they will rise on July 1, meaning it may be wise to secure a lower rate before the change.

5. Federal loans offer many repayment and forgiveness options

All borrowers are eligible for Standard Repayment and Graduated Repayment plan options, and there are also Extended Repayment plans and Income-Driven Repayment Plans, where the borrower must meet certain criteria to be eligible. The Public Service Loan Forgiveness program for non-profit employees forgives all outstanding loan balances after 120 qualifying monthly payments. Educate yourself on the different types of plans to find ones that align with your specific financial goals.

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