Rebecca Ballhaus

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97 appearances 1 recordings 1 series first heard Apr 2022 last heard Apr 2022

Rebecca Ballhaus’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Repaying Student Loans: What Options Do You Have? · 29 Apr 2022 podcast

So if you're trying to change plans early on, it's less likely that a lot of interest will have accrued, so this won't be as big of a deal.

But if you've been in repayment for several years and haven't necessarily been paying down the interest on your loan with each monthly payment and you do want to switch plans, it's worth considering paying down the interest before switching.

So the pros are that it lets you pay a smaller amount every month.

It sets your monthly student loan payment at an amount that's intended to be affordable based on your income and on your family size.

So that makes sense if you're someone who's struggling to pay the monthly payments under one of the 10-year plans that I mentioned.

The cons are that if you enroll in an income-based repayment plan,

you may actually end up paying more in interest over the loan's duration than you would under a shorter repayment plan with higher monthly payments.

And you'll also be in repayment for twice as long.

The problem is that on an income-driven plan, the monthly payments are often not enough to cover the interest that a loan is accruing.

And that means that the overall balance continues to grow even as you're making these payments.

That's right.

Yeah, your balance can continue to grow and it can be a source of a lot of frustration for a lot of borrowers to see that number keep going up even as they're diligently making those payments.

What experts say to do is to choose the repayment plan that has the highest monthly payment that you can afford.

So you don't want to go for the plan with the lowest payment because that sounds nicer.

You really do want to pay off as much as you can make work with your income.

You also want to think about things like how you expect your income to change over time.

Do you expect to get married in the near future?

And if so, how much does your future spouse expect to make?

Experts really only recommend considering an income-driven plan if you're struggling to make the payments on a 10-year plan or if your total debt at graduation exceeds your annual income.

So one thing you can consider is consolidating the loans.

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