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Dear Credible Money Coach,
I took out a Parent PLUS loan every year for my two sons. From Sallie Mae to Navient, I defaulted several times until I got a steady job and consolidated through Direct Consolidation Loans. Will I be eligible for a Navient Loan Discount on my Direct Consolidation Loan? My balance went up to $80,000. I started with $25,000. – Lucy
Hello Lucia and thank you for your question. I’m sorry you’re struggling with student loan debt. I hope the loans have helped your sons earn degrees to help them achieve their career and financial goals.
Unfortunately, it’s unlikely you’ll be able to get your debt forgiven under the terms of the Navient settlement (more on that in a moment). However, other alternatives may make your debt more manageable or qualify you for future forgiveness, which I’ll explain.
One option I don’t recommend is to refinance your direct consolidation loan into a private student loan, even though it might lower your interest rate. But if you or your sons have private student loans, refinancing can lower their costs. Discover Credible and compare student loan refinance rates from several lenders.
About Navient Colony
Earlier this year, Navient agreed to settle a lawsuit filed by attorneys general in multiple states. As a result, the company (which split from Sallie Mae in 2014) agreed to forgive the debt of approximately 66,000 borrowers who took private student loans from Sallie Mae from 2002 to 2010 and defaulted. . To be eligible for relief under the settlement, borrowers must:
- Live in a state participating in restitution: Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan , Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Vermont, Washington, West Virginia or Wisconsin.
- Have an eligible private student loan.
- Be past due for at least seven consecutive months before June 30, 2021.
The settlement provides restitution for certain federal student loan borrowers with Federal Direct or FFEL loans who have been forborne, although they are eligible for income-based repayment. However, direct consolidation loans do not qualify.
According to Navient Multi-State Settlement Website, it seems unlikely that you will be entitled to relief. But if you live in a participating state listed above, contact your state attorney general’s office for more information.
Alternatives to consider
Lucy, while getting a direct federal consolidation loan may not have lowered your interest rate, it has simplified your payments while preserving access to some important federal student loan benefits. Since $80,000 debt is heavy to bear, it is worth exploring the following options to make it more manageable.
Income Oriented Repayment Plans
Your direct consolidation loan is eligible for a income-contingent reimbursement plan (IDR). They set your monthly payment based on your income and the size of your household.
Although IDR plans don’t help you pay off student loans sooner, they do make them more affordable. Remember that interest accrues while you’re on an IDR plan, so your total debt increases over time. You can learn more about IDR diets on StudentAid.gov.
Cancellation of civil service loans
Although you have consolidated multiple Parent PLUS Loans into a new Direct Consolidation Loan, you are still eligible for the Federal Public Service Loan Forgiveness (PSLF) Program, provided you meet other qualifications.
You (not your sons) must work full-time in a qualifying job for the military, a government organization (federal, state, local, or tribal), a nonprofit organization, or in education. And you must make 120 qualifying monthly payments, although they don’t need to be made in consecutive months. You can learn more about the PSLF program on StudentAid.gov.
Long-term loan forgiveness
Although not ideal, you can also make student loan payments until you automatically qualify for a rebate. Most federal loans, including direct consolidation loans, are forgiven after paying for 20 or 25 years and remaining current.
If you qualify for an IDR plan, the reduced payments should help you never miss a payment. Once the payment deadline has expired, the remaining balance of your loan is cancelled.
Student Loan Refinance
Refinance a federal student loan in a private loan is a great option in some situations. This can allow you to lower your interest rate, lower your total interest, and pay off the student loan sooner.
First, be sure to exhaust your federal student loan options. Carefully weigh the pros and cons of maintaining your direct consolidation loan versus refinancing into a private student loan.
If you decide that refinancing is right for you, compare student loan refinance rates with Credible.
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About the Author: Laura Adams is a personal finance and small business expert, award-winning author and host of silver girl, a weekly audio podcast and top notch blog. She is frequently quoted in the national media and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her work as a speaker, spokesperson and advocate. She earned an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, instagram, Facebook, Twitterand LinkedIn.