My Coast Guard
Commentary | Oct. 25, 2021

How to best repay your student loans  

By John Daskauskas, D7 Personal Financial Manager (PFM) 

According to the Federal Reserve, over 44.7 million Americans have student loans on file, adding up to a staggering $1.7 trillion debt in September 2020; making it the largest type of outstanding consumer debt, other than mortgages. The graduating class of 2019 walked off the stage with an average debt of $28,950. That means nearly six out of 10 graduating seniors had student loan debt. The Consumer Federal Protection Bureau estimates that over one in four borrowers are delinquent or have defaulted on their student loan debt. 

With a little bit of planning and goal setting, the listed above numbers can be improved drastically. There are a wide range of options available to pay down student loans. Before exploring student loan repayment options, it is recommended that you organize your student loan accounts by using the following criteria: 

  1. Identify if your school loan is federal or private 
  2. Determine your debt balance and the status of your loans 
  3. Identify the loan servicers associated with your student loan accounts 
  4. Build a reasonable and flexible spending plan that will cover your payments 

After organizing your student loan accounts, then you should determine if you are eligible for military or public service forgiveness programs such as:

  • Servicemembers Civil Relief Act (SCRA): This federal law limits the interest rate of all pre-service debt to 6% while the service member is on active duty. 
  • 0% Interest During Deployment: While serving in a hostile area that qualifies for special pay, active duty service and reserve members may be eligible to have their student loan interest rate reduced to 0%.  
  • Public Service Loan Forgiveness:  If you qualify for this program, the balance of your federal direct loans may be forgiven. You must be employed full time in a qualifying government or nonprofit public service organization and make 120 qualifying payments (10 years) after October 1, 2007; and must submit an employment certification for Public Service Loan Forgiveness to determine eligibility. For additional information, visit the Public Service Loan Forgiveness Limited Waiver Opportunity website.

If you are struggling to make your student loan payments, you can consider obtaining a deferment or forbearance for your student loan. It is important to know that interest will continue to accrue on your student loans and delaying repayment could cost you more money in the long-term.  

Loan Deferment:  

Temporary postponement of your loan payment is allowed under certain conditions. Reasons for loan deferment could include financial hardship, active duty military service, or continued education.  

Forbearance:   

Temporary reduction or suspension of your student loan payments due to certain types of financial hardships. 

It may be worth exploring other options for student loan repayment duet to the interest impacts of loan deferment and forbearance. Other options include:

  • Standard Repayment: In this plan, payments are a fixed amount that ensures your loans are paid off within 10 years. 
  • Graduated Repayment:  This plan allows for the borrower to pay less in early years of repayment and more later as they become more financially established. The loan is paid over a ten period which results in you accruing more interest overall.  
  • Extended Repayment: With this plan, the borrower must owe more than $30,000 for the repayment term to be extended up to 25 years. The monthly payment is reduced in this plan, however, the total cost of loan is much higher due to interest. 
  • Payment Reduction: Income-driven repayment plans are designed to reduce your monthly payment amount. There are multiple possibilities to choose from based upon your income and family size.  
    • Two options are: Revised Pay As You Earn Plan (REPAYE) and the Pay as You Earn Plan (PAYE). The monthly payment equals 10% of the borrower’s discretionary income and includes a 20- to 25-year repayment term. 
  • Consolidation Loans: This option allows for student loans to be combined into one loan which may provide simplicity: 
    • However, interest rates are usually a little higher and repayment term can be extended up to 30 years.  
    • Financial experts advise against consolidating federal and private student loans together into a private loan because there is a loss of federal protections, repayment and forgiveness options. 

Lastly, be sure that you are aware of all of your options and consequences before selecting a repayment plan or loan consolidation. Remember that being delinquent or defaulting on a loan can have negative consequences on your credit score. Knowing your student loan repayment options can help you manage your student loan and eventually pay back your debt. 

Student Loan Resources: 

Coast Guard Resources 

  • For additional help reach out to your nearest Personal Financial Manager (PFM) located at the Health, Safety, and Work-Life Regional Practice (HSWL-RP). 
  • Your Command Financial Specialist (CFS) is available for support with basic financial training, budgeting, and referrals. 
  • CGSUPRT provides unlimited 30-minute money coaching sessions, online resources and financial classes. For more information visit www.CGSUPRT.com or call 1-855-CGSUPRT. 
  • For information of education assistance, contact your local education service officer (ESO). 
  • For additional resources and information for the Office of Work-Life Personal Financial Management Program, please visit their website.  

About the writer 
John Daskauskas, is an AFC® and serves as the Personal Financial Manager (PFM) for District 7, with a home base in Base Miami Beach (BMB), Florida. He has been working in Military and Family Service Programs since 1996. Daskauskas likes to actively involve members on best methods and practices on how to achieve personal finance success and work/life balance. You can email him or call him at 305-340-9307.