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Student Loan Moves When You Start a New Job

Changing employers sometimes means that it is time to change your student loan repayment strategy.

Written By: Michael P. Lux, Esq.

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Starting a new job means new opportunities to eliminate student loan debt.

Anytime you have a change in employment status, a student loan checkup is a good idea. Changing employers may open up new doors for student loan forgiveness, and your new company might even help pay off your debt.

Whether your income is going up or down, there are potential avenues for savings.

Income-Driven Repayment (IDR) Plans and a New Salary

A new salary obviously means changes to your Income-Driven Repayment (IDR) plan. If your salary is going up, you will want to delay the IDR changes as much as possible. If you are taking a pay cut, you will want the IDR payments to reflect the new position ASAP.

Loan servicers do not require a new income certification when a borrower changes jobs. However, borrowers may immediately apply to have their income recalculated if their income drops. Those taking lower-paying positions should complete a request for a new calculation of payments.

Those earning more money may be able to delay the new salary impacting payments. When you next re-certify, use your most recent tax return instead of a pay stub from the new job. If your recertification deadline is around the same time you file taxes, be sure to certify income first, and then file your latest tax return. Minor tweaks in timing could save hundreds of dollars per month for the next year.

Married borrowers should also reconsider their decision to file taxes jointly or separately.

Career Specific Student Loan Forgiveness and Public Service Loan Forgiveness (PSLF)

If Public Service Loan Forgiveness (PSLF) is even a tiny possibility, submitting employer certification forms (ECF) becomes essential. Borrowers should submit an ECF for their old job and their new job. The newly designed Department of Education PSLF Help Tool will provide borrowers with the necessary paperwork to complete.

If there is even a slight chance that an employer is eligible for PSLF, submitting an ECF is critical. After you leave a job, employer certifications get more difficult as time passes. Proving eligible employment long after you have exited the job can be difficult. Avoid this challenge by completing the ECF as you leave. Once the old employer has been certified, no additional contact with that employer will be necessary when you apply for PSLF years down the road.

Similarly, you will want to complete an ECF after your first month or two with your new employer. This step is crucial because it is the only way to ensure you are making progress towards PSLF. If the new employer isn’t eligible or if there is a problem with the loans or the repayment plan, an ECF will help identify these issues. If you wait several years before completing an ECF, it is possible that years of payments won’t count towards PSLF because of a minor issue that cannot be fixed after the fact.

Finally, keep in mind that PSLF isn’t the only forgiveness option. Many professions have job-specific forgiveness programs. If you are starting a new job, it is an excellent time to consider new student loan forgiveness opportunities that may be created.

Investigate Student Loan Benefits and Retirement Benefits

Many employers have student loan benefit programs. These programs can take various forms. One surprising aspect is that many people within your new organization may not be aware of the available student loan payment assistance. Thus, new employees should ask around to find out if such a program exists.

Additionally, retirement plan options may also impact student loan strategy. Borrowers who have the chance to benefit from a generous employer match will usually want to maximize this benefit. Borrowers may also be able to use retirement plan contributions to reduce monthly student loan payments or even increase the amount of debt forgiven.

In short, new jobs come with new perks. Student loan borrowers should consider these benefits carefully and explore changing their repayment strategy.

Leverage Your Income into Better Loans

Thus far, most of the discussion has centered around options for borrowers with federal student loans. However, a new job also means new opportunities for borrowers with private student loans.

If you are earning more money, your debt-to-income (DTI) ratio will be improved. In the eyes of student loan lenders, a better DTI means less risk. Put simply, more income means the borrower is more likely to repay their loans.

Borrowers with high-interest private student loans may be able to dramatically improve their interest rates by refinancing their loans.

At present, the following lenders are offering the best refinance rates:

RankLenderLowest RateSherpa Review
T-1ELFI5.28%ELFI Review
T-1Splash Financial5.28%*Splash Financial Review
3Laurel Road5.49%Laurel Road Review

Finally, those with cosigners may be able to use their improved employment status to get their cosigner released from their loans.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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