Episode 166: Learn about the nuances of federal student loans, misconceptions about loan forgiveness, and how to watch out for common mistakes when looking for student loan information with Michael Cundick of Student Loan Tutor.
What Makes Federal Student Loans Unique?
Federal student loans are a unique form of debt, as they’re the only form of forgivable debt in the USA. You can treat it as a traditional, balance-based repayment that allows you to pay it down quickly with low-interest rates. However, income-driven repayment is what sets this apart.
Income-driven repayment and loan forgiveness applies to federal student loans and can be a total gamechanger. If people understand how to navigate these programs, it can make a big difference in their financial lifestyle.
Private vs. Federal Student Loans
Private loans are like normal balanced-based forms of debt that can’t be altered or scaled. Michael recommends avoiding taking them. It’s also important to be cautious when taking out a federal student loan known as a “Parent Plus Loan” which eliminates the opportunity to use income adjustments down the road.
Why Is Student Loan Forgiveness so Controversial?
The term “student loan forgiveness” has become really politicized. What’s not understood by many people against this movement is that student loans are a lot higher with enormous interest rates in comparison to those in the past.
It’s almost impossible to get rid of federal loans through bankruptcy, so what does student loan forgiveness really mean?
Income-driven repayment options are meant to replace the need to file for bankruptcy. In some cases, an income-driven repayment structure allows for a $0 payment. This creates a double-edged sword as that makes it impossible to prove to a judge that you can’t afford a payment. It creates a lot of confusion.
The structure of student loans also plays a role in how high tuition costs are, as universities take that opportunity to set their tuition rates.
There are a lot of types of income-driven loan payments and forgiveness. Student Loan Tutor aims to help people pay those loans down in the way that’s most economical for them.
Common Mistakes with Student Loans
There’s a lot of misconceptions as a result of inflammatory headlines and the politicization of this issue. Taking time to look beyond those headlines to do research about the regulations and eligibility will help tremendously.
With Student Loan Tutor, you can get an hour-long consultation to find the best route forward. Check out the details in the link below.
Disclaimer: Kevin and Sean are not professional financial advisors. Do not take any advice they give without first speaking with a professional and performing your own due diligence.This post may include affiliate links.