Thread by @knguyenpoetry

I used to work in student loan servicing and here are the top things I think people need to know about their federal student loans and how to make them manageable if you’re really struggling to pay them. A thread:

First of all, any time your loan changes status for any reason (in school deferment to repayment status or repayment status back to in school deferment), your interest capitalizes (gets added to your principle balance).

This means that if you’re graduating, and you have the ability to pay down that interest, you should because otherwise it’ll get added to the balance your interest rate is calculated off of! Until the status changes, the accrued interest and principle balance is separate!

You only get one 6 month grace period per loan. So if you take a year off school, your 6 month grade period is used at that time for the loans you already have, and when you graduate, those loans immediately become due because you already used the grace period.

If you take out new loans, those still have a 6 month grace period, which will also kick in when you graduate, but when they come due after the grace period, the minimum amount you have to pay each month may jump because those loans were in grace. Be prepared.

The government has many existing forgiveness programs—teacher loan forgiveness, public service loan forgiveness to name a few—call your student loan servicer to learn about eligibility!

If you lose your job, your minimum payment can be $0 and be counted as a valid on-time payment. You need to call your student loan servicer and apply for an income driven repayment plan. In fact any time your income changes, you can ask for your minimum payment to be recalculated

One of the income driven repayment plans also pauses interest on your subsidized loans and pays for 50% of the interest on your unsubsidized loans for 3 years! But you have to renew the plan every year! Don’t forget otherwise the clock keeps ticking but you don’t get the benefits

Your loans come with 36 months of forbearance, which are months you can skip payments for any reason no questions asked. If you reconsolidate, it’s considered a new loan with a new 36 months of forbearance. Don’t reconsolidate until you have to if you want to maximize this.

But keep in mind that’s a status change from repayment to forbearance and back to repayment. Your interest will capitalize twice because your loans will have changed status technically 2 times. Your interest will also capitalize if you change repayment plans.

If you remain on an income driven repayment plan for I believe 20/25 years, your loans get forgiven/discharged. They haven’t decided which it is yet because no one is there yet but the difference is one is taxed and one isn’t. But you have to renew it every year for it to count.

Get your renew paperwork in on time! If your loans falls out of the income driven repayment plan, even if you are back in a month later when you turn in the paperwork on time, your interest will capitalize when you fall out and when you get put back on!

The program will ask for your most recent income information. So if you made a ton of money last year but this year you make much less, you can submit pay stubs instead of your 1040. Submit what most accurately reflects your CURRENT income.

For the love of god do not consolidate your loans with a private company because they will not offer you any aid when you fall into hard times and the federal government does. Once you consolidate them out, you can’t bring them back.

I will add to this thread as I think of things and I will also take any questions.

Okay I guess I should add that simply not paying your federal loans is not an option. They’ll garnish your wages and put a lien on your house. The DOE and IRS don’t mess around.

Adding that parent PLUS loans are generally not eligible for income driven repayment plans and cannot be transferred to the student ever. Just like your child, those loans are yours for life. So really think about it before you sign those papers.

@laurenjonik The new payment plan introduced in 2015 calculates payments based on a smaller percentage of your discretionary income and reduces the amount of time needed to be on it before forgiveness. It’s only for loans after 2014 but if you consolidate, they may consider that a new loan.

Adding that you do NOT have to consolidate with a private lender!! You can consolidate with the federal government!!! Private companies take advantage of the fact that 1) people don’t know this and 2) people are willing to gamble for a lower interest rate

@DSchneider6 I would have my child exhaust all federal loan options available to them first. You can always help pay them, but they’re going to get the best deal from the government. And after that if I absolutely HAD to, I’d do the parent plus BECAUSE of the loophole

@DSchneider6 The loophole is if you consolidate a parent plus loan twice (so leave out a few loans the first time you consolidate) you can become eligible for certain income driven repayment plans that usually only student borrowers get access to.

Normally I promote my book when my tweet threads go viral, but this time I want to ask you to consider donating to @QuestBridge, which helps high-achieving low-income scholars access higher education: questbridge.org/donate

@AndreaG114 But I would call your student loan servicer and ask! It’s been a minute since I did this!

@CarrieBenatti @SugasWhisper1 @MrsYALibrarian They’ll all tell you what your minimum payment is, but if you have extra I would prioritize paying off the private loans because they generally have higher interest rates and don’t usually help you if you can’t pay. Your federal loans have plenty of options.

@CarrieBenatti @SugasWhisper1 @MrsYALibrarian Your best resource for your federal loans is your student loan servicer. They will be able to tell you what aid you qualify for and answer questions about your specific loans, and they will also never charge you to help you.

@chelseamlinehan I didn’t work at a student loan servicer during pandemic though. So don’t quote me on this. You’ll have to call your servicer and ask specifically about these 3 COVID years and if they count. But they likely won’t.

I’m turning off notifications for this because I was trying to be helpful and some of y’all are being mean. I obviously preferred cancellation but I put this thread out there for people on the verge of losing housing or starving when loans come due again.

I clearly don’t make the rules but just knowing these rules could save you from drowning. Like sure, we’re all still in loan shark infested waters but some of us have floaties and some of us have lost legs. I wanted y’all to know what floaties are available.