Question: I owe about $40,000 in student loans. Is there any help out there or am I going to be paying them for the rest of my life? I am a disabled vet ($1100 monthly) and now work for the State of Florida (I only make about $1500 a month). After my mortgage of $1000, car $600, ins $200, electricity $200, water $150, cable $150, groceries, and gas there isn’t much left. Do you have any suggestions? – Marie D. in Florida
Andrew Pentis, personal finance expert and certified student loan counselor at Student Loan Hero, responds…
Repaying student loan debt is a challenge for every borrower – but with a disability and a low-paying government job, the task might seem impossible.
Throw in a tight budget like yours, Marie, and you’d be excused for feeling helpless. That $300 leftover from a monthly income of $2,600 won’t be enough to whittle down your five-figure education debt.
Fortunately, some of the exact same stumbling blocks making your loan repayment difficult could turn into stepping stones toward the finish line. Here’s how:
1. Disability: Are you eligible for loan forgiveness?
You mentioned receiving a $1,100 monthly check from your disability, Marie, but did you know that it could also qualify you for federal student loan forgiveness?
The Education Department cancels the balance for borrowers who suffered a “total and permanent disability.” You could qualify if the Department of Veterans Affairs certifies that you suffered a complete disability while serving the country. Visit DisabilityDischarge.com to gauge whether you qualify.
Unfortunately, there’s no such forgiveness program for private student loans, although select lenders – including Discover, Wells Fargo, and Sallie Mae, to name a few – offer loan cancellation in cases of the borrower’s total and permanent disability.
2. Government work: Are you eligible for Public Service Loan Forgiveness?
You might wish you made more money from your Florida government work, Marie, but this is another negative that could prove positive. That’s because government employees are eligible to receive a reprieve via the Department of Education’s Public Service Loan Forgiveness (PSLF) program.
The downside of this repayment strategy is that you must work for an eligible employer for 10 years – and simultaneously make prompt payments – before forgiveness comes into play. Check out the Education Department’s PSLF Help Tool to confirm you’re fit for the program.
If you’re eligible, keep in mind that you could enroll in income-driven repayment for the decade that you’re working toward PSLF. An income-driven plan would make your monthly payment much more manageable by capping it at a percentage of your discretionary income. The Repayment Estimator from the government’s Federal Student Aid office can help you calculate your potential monthly dues.
Again, both PSLF and income-driven repayment are exclusive to federal loans and aren’t provided by private banks, credit unions, or online lenders that might be managing some of your loan debt. It’s still worth phoning your private lenders, however, to ask about their forms of support.
3. Tight budget: Can you increase your income?
If your disability doesn’t qualify as “total and permanent” to make you eligible for loan forgiveness, hopefully, it also won’t limit your ability to increase your income.
With such a tightly-wound budget, bringing in more money every month is the sure-fire way to pay down your debt faster. Of course, that’s easier said than done.
If climbing the career ladder in state government isn’t a realistic option, you could explore transitioning to a job (within or outside of your field) that pays more. You could also hold onto your government job but take on a side hustle – perhaps one related to your military background – to start a new income stream. Some can even be done from home, using a smartphone or laptop.
4. One more consideration: Is student loan refinancing right for you?
If you find yourself ineligible for forgiveness related to your disability or your government job, you could benefit from working with a new private lender, especially if you already have private loans.
Student loan refinancing can reduce your interest rate if you have strong credit or if you can find a creditworthy cosigner. In your case, Marie, refinancing could also reduce your monthly payment, perhaps until you’re able to increase your income.
Just be aware that if you refinance federal student loans, it will strip them of their government-exclusive protections. So, don’t elect to refinance until you’re sure you won’t need access to those forgiveness programs and income-driven repayment plans, among other perks.
Choose the repayment solution that delivers the best rewards
As you take stock of your student loan situation, you’d be excused for feeling frustrated. You have more obstacles to overcome than what many borrowers face.
Still, look at the pieces of your predicament as opportunities. There are loan forgiveness programs for borrowers with a disability or a government job. There are also ways – from increasing your income to refinancing your debt – to start moving in the right direction.
Evaluate all of your options before choosing the solution that helps you take the longest stride toward the end of your repayment.
