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A student loan repayment primer

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Atlas Company
More than 400,000 Arkansans have some student loan debt.

As of June 2023 - 400,000 Arkansans had some amount of student loan debt, according to numbers from the United States Department of Education. That's more than 10 percent of the state's population.

Tony Williams is with the Arkansas Student Loan Authority - the state agency in charge of providing information and resources on educational finances. He said the total dollar amount of student loan debt as of June 2023 was $13.5 billion dollars.

"So when you consider that another semester has begun," he said. "We're probably up to 14 billion now."

The weight of that debt is starting to sink in for more borrowers in October when loan payments due and interest accruing again after a three-year break because of the COVID pandemic.

So, what exactly should those borrowers know?

Rachel Rotunda, director of government relations for the National Association of Student Financial Aid Administrators, recommends every borrower should start by getting in touch with their loan servicer.

"So if you if you have loans through the Department of Education, you will be assigned a loan servicer and this is really the entity through which you're actually going to be making your monthly student loan payments," she said. "They're there to walk you through what options might be available."

A servicer is essentially a company who handles the repayment of your loan and Rotunda said the department of education should contact you before your payments begin - likely through email and snail-mail - about who that is. But, if they haven't, you can find all of the information about your servicer by logging into the federal student aid website: studentaid.gov.

"And then once a borrower has confirmed who their servicer is," Rotunda said. "You'll be able to find a lot more specific information on things like payment due date and different repayment plans that are available."

Once you've logged in make sure to update your contact information - if you no longer have that student email or you've moved to a new address the department of education and your loan servicer needs to know.

If you can't access the website or forgot your password, you can always call for help 1-800- FED-AID (or 1-800-433-3243).

Okay so now you know who to pay, but what about how to pay?

Williams said the federal government is offering borrowers a lot of leniency from now through October 2024.

"The Department of Education is allowing student loan borrowers to have a what they call an on ramp period," he said. "Where you have the first 12 months to really become re-acclimated and making your student loan payments."

During the 12-month on-ramp, if you miss or need to delay a payment the usual penalties and late fees won't apply.

As for the repayment options. Rotunda said most are income-driven.

"These are payment plans that borrowers can enroll in that determine the monthly payment amount based on a borrower's income and family size," she said. "And the intent here is that payments under these income driven repayment plans are are supposed to be more affordable than what you might have under like a 10 year standard repayment plan."

Each of these plans, she explained, provides borrowers with forgiveness of their remaining balance after 20 or 25 years of payment just depending on the plan.

Williams said some of the re-payment options since the pandemic pause have changed, though.

"One new option that student loan borrowers have is the SAVE repayment plan," he said. "It allows a borrower to make lower monthly payments than they were required to in the past."

SAVE - an acronym for Saving on A Valuable Education - has more than 38,000 Arkansans enrolled, and the Department of Education estimates the plan could save borrowers an average of $1,000 dollars a year based on adjustments for income, family size and current loan balance.

But what about loanforgiveness?

There is one option that's been around since 2007: The Public Loan Forgiveness program covers the remainder of a person's debt after 10 years and 120 qualifying payments while working full time for state, federal, tribal or local government, the military or a qualifying non-profit.

And while the U.S. Supreme Court struck down a plan from the Biden Administration to deliver sweeping debt relief earlier this year, Rotunda said the department of education has been working to offer more targeted relief. The Education Department is currently giving retroactive credit for time spent in repayment that didn't qualify - like forbearance or deferment.

"But we do know the administration is moving forward with trying to administer that cancellation program through a different pathway that comes through a different legal authority," Rotunda said. "So we won't really have clarification on if or if that plan will be able to move forward...until some months down the line."

Both Rotunda and Williams suggest using the student aid website's loan simulator to help you determine what repayment plan makes sense for you and if you qualify for any debt forgiveness. It'll ask all kinds of life questions from employment and income to marital status and where you live and your repayment goals.

So, now you've got an idea of how to go about paying back those loans, but what about dealing with the stress?

Susan Tonymon is a counselor with the University of Arkansas for Medical Sciences Northwest Campus. She works with a lot of medical school students and recent graduates and said the financial anxiety from loan debt can be crippling and, in some cases, even prevent people from making those payments.

"One thing I really work on is, is trying to help people put it in perspective," she said. "So that it just doesn't consume all of their thoughts."

Tonymon said identifying the stressor is important and talking with your financial counselor or loan servicer about action items to get or stay on track can help people get perspective and manage the anxiety of debt.

"If you visualize it, you know and you get really specific on how you're going to cope ahead for that," she said. "A lot of what I do with students is helping them rehearse those uncomfortable situations."

UAMS operates a call center and virtual clinic for anyone in Arkansas experiencing mental health issues or stress. For information you can visit the AR Connect website.

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Daniel Caruth is KUAF's Morning Edition host and reporter for Ozarks at Large<i>.</i>
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