Important tips for student loan borrowers
Understand the difference between law and regulation
Key Takeaway: Laws are passed by Congress, while regulations are created by the federal agencies when interpreting and implementing those laws. The recent overturning of the Chevron Doctrine has limited the power of the regulators in the student loan space. Recognizing this distinction will help you understand which aspects of your loans are legally protected versus those governed by regulation.
Know the tax filing implications on your student loans
Key Takeaway: Your tax filing status can affect your loan repayment options, especially in community property states or if you file jointly or separately. Consult with a CPA and coordinate with your student loan professional to avoid surprises and help ensure you’re maximizing benefits like income-driven repayment plans or forbearance options.
Beware of private loan consolidation offers
Key Takeaway: While private loan consolidation might sound appealing due to lower interest rates, it can mean losing access to key federal loan benefits like income-driven repayment plans, Public Service LoanForgiveness (PSLF), and deferment. Weigh the pros and cons carefully before consolidating.
Look out for student loan scams
Key Takeaway: In uncertain times, scammers often prey on borrowers’ fears of managing their loans. Always double-check offers, especially those that seem too good to be true, and rely on reputable organizations and resources to avoid falling victim to fraud.
Plan a hedge for financial security
Key Takeaway: Having a backup plan in case your income is disrupted, or your financial situation changes can be crucial. Consider building up an investment account to equal your loan balance in case forgiveness is denied or explore disability insurance to protect yourself from loan default in worst-case scenarios.
Develop a comprehensive financial plan
Key Takeaway: Student loans are just one part of your financial picture. Work with a professional to create a plan that incorporates retirement savings, emergency funds, and other important goals, to help ensure that managing your debt doesn’t come at the cost of your long-term financial well-being.
Stick to reliable resources and seek professional counsel
Key Takeaway: The student loan landscape is constantly evolving. Rely on certified professionals who stay up to date with the latest changes and can provide tailored advice. This guidance will be crucial as you develop a comprehensive financial plan that includes not just your student loans, but also other financial goals.