Personal Finance Coach: Amauris Belen on Student Loans
Tags: Human Resources, Student Loans, Personal Finance, Personal Finance Coach, Debt

Personal Finance Coach: Amauris Belen on Student Loans TrustPlus Follow Aug 27 · 3 min read

Federal student loan relief is extended through January when the “final extension of the pause on student loan repayment, interest, and collections” ends on January 31, 2022. TrustPlus Personal Finance Coach Amauris Belen discusses what he’s hearing from clients and how he’s helping them prepare.

What have you been hearing from clients about student loans?

I have clients who are seeking guidance or advice on how to manage their student loans and they’re trying to find out what their monthly payments are going to be when the pause ends at the end of January.

They also want to know the total balance of their overall student loans and whether they are, or can enroll, in an income driven repayment plan that allows them to qualify for public service loan forgiveness down the road.

[If you are employed by a government or nonprofit, you might be eligible for the Public Service Loan Forgiveness Program.]

What should I do if I know I’ll struggle to pay my loans when the pause ends?

My main recommendation is always to call your student loan servicer. They’re going to help you manage those loans and ultimately help you pay those loans back to the federal government.

One way to decrease your monthly student loan payment, if it’s too high for your current budget, is by entering what’s called an income-driven repayment plan. Your servicer will collect your income information, your family size information, and other details about your personal finances to determine the income driven repayment plan that will work best for you.

They also have options that are readily available for folks that are experiencing hardship. Some of those options are to place your student loans in forbearance or deferment so you won’t have to make payments for a given time. Reach out to your student loan servicer to find the status of your loans and to put them in a status that allows you to forgo making payments until you stabilize your situation.

What are some strategies you use with clients to address their student loans?

One strategy is the avalanche debt reduction strategy which focuses on paying off the debt with the highest interest rate first.

Another strategy is to target the student loan with the lowest balance or the snowball debt reduction strategy.

Ultimately, for either strategy, you will communicate with your student loan servicer to apply any additional payments on top of the minimum to the loan with the lowest balance or highest interest rate.

I recommend vastly different strategies for folks who are enrolled in public service loan forgiveness or some sort of income driven payment plan since a portion of their loan will be forgiven. If that’s the case, then making extra payments on your student loans might not be the best strategy. It might be best to hold on to those extra payments and perhaps invest them or save them for emergency needs. The strategies are different based on the client.

Another option is consolidation. Folks can consolidate with a different student loan servicer, a credit union, a bank or institution that specializes in student loan lending; but before clients take those steps I help them determine what would be best for them. We analyze the strategies that are available to them to eliminate their debts and also save money over time.