If you grew up in a household like mine, going to college was not an option, it was an expectation. As a child of immigrants, navigating the complexity of the financial aid system can feel like following the instructions for an IKEA cabinet but with missing parts and in two point font size.
Student loan debt is a significant drain on the economy and it continues to keep millions of Black, Indigenous, and People of Color (BIPOC) from starting families, obtaining additional degrees, going back to school and buying homes. Students of color carry greater loan debts which exacerbate the racial wealth divide and without fundamental reforms and the elimination of tuition and college fees, this problem will only worsen.
According to an analysis of government data by the Center for American Progress (CAP), in the United States, an average of 65% of Latinx students have taken out federal student loans compared to 87% of Black students and only 60% of white students. Student loan debt is a systemic problem that is only getting worse as students face rising college tuition at a time when the costs of borrowing are increasing and borrower protections are virtually non-existent.
Here are a few things to keep in mind as you navigate the world of loan repayment, forbearance and deferment.
- Nothing is written in stone. When you first take out a loan, generally you are assigned a repayment plan, however, it’s a little known fact that you can change your plan at any time at zero cost.
- Understand your options. You may have heard the terms forbearance and deferment. Both allow you to temporarily postpone or reduce your federal student loan payments. The main difference is if you are in deferment, no interest will accrue to your loan balance. If you are in forbearance, interest will accrue on your balance. During the COVID-19 emergency, most federal student loan borrowers were automatically placed in an administrative forbearance, which provides a temporary stop to monthly loan payments. This suspension of payments was enacted in March 2020 and was originally expected to end on Dec. 31, 2020. Borrowers on administrative forbearance can still make payments. Contact your loan servicer to find out if there are other loan relief options you may be eligible for.
- Be a basic borrower. A Standard Repayment Plan is the most basic repayment plan that will save you money over time even though monthly payments may be slightly higher than payments made under other plans. This plan usually results in loans being paid in a shorter amount of time with the least amount of interest over the life of your loan.
- Porque life happens. The Income-Sensitive Repayment Plan is available to low-income borrowers who have a Federal Family Education Loan (FFEL). Payments under this plan increase or decrease based on your annual income. Additionally, income-driven repayment (IDR) may solve unaffordable monthly payments by aligning your payments with how much money you earn. However, because interest keeps accumulating, you may be making smaller payments while watching your balance grow.
- You may not have to pay your loan back. In some employment instances, you may no longer be required to make payments on your loans aka forgiveness. Public Service Loan Forgiveness (PSLF) is available to those who are employed full-time by a U.S. federal, state, local, or tribal government or non-profit organization. Additionally, if you teach full-time for five complete and consecutive academic years in a low-income school or educational service agency, you may be eligible for Teacher Loan Forgiveness; you may no longer be required to make payments on your loans if you have experienced total and permanent disability or the school where you received your loan has closed.
In our community, higher education has long been considered the ultimate milestone towards advancement in the United States and is seen as the culmination of sacrificios made by our parents and grandparents. We are our ancestors’ wildest dreams, therefore, we should stay informed and explore our options since we all deserve an equal pathway to opportunity.