Just because you can settle student loan debt doesn’t mean it’s right for you. Depending on your age, income, and other goals, keeping that lump sum payment in your bank account rather than paying off the federal government or private student loan lenders might be the better move. You’ll keep money in your pocket to take care of your family and address emergencies rather than paying towards a debt you may be able to manage using different options.
Private Loan Options
For example, if you’re struggling to pay private loans, request a deferment or forbearance to temporarily pause the student loan payments, or look to refinance with a new lender. Student loan refinancing can lower interest rates and monthly payments. But be careful refinancing federal student loans. You could lose access to the benefits and protections the federal government offers its student loan borrowers.
Federal Loan Options
If you have federal loans, consider switching to one of the income-driven repayment plans. I’ve seen many people cut their student loan payments by more than after switching to an IDR Plan like SAVE.
You can also check out student loan forgiveness programs like Public Service Loan Forgiveness (PSLF) and the one-time account adjustment. These programs can wipe out your loan balance in a few short years.
Note: You may need to consolidate to get access to these programs. You can consolidate for free on the Federal Student Aid website, StudentAid.gov.