For many Americans, paying rent each month is a struggle.
When putting a roof over your head is a hardship, keeping up with student loans may seem like more of a luxury and less of a necessity.
Fortunately, there are many programs to help student loan borrowers and renters facing financial challenges.
Income-Driven Repayment for Federal Borrowers
One of the best perks that go with federal student loans is the availability of income-driven repayment plans. The idea behind income-driven repayment is that borrowers make payments based upon what they can afford instead of what they owe.
Borrowers with large loan balances may qualify for low monthly payments. Those who have an income below 150% of the federal poverty level can qualify for $0 per month payments.
A key benefit of IDR plans is that they offer long-term payment relief, allowing borrowers to make reduced payments for as long as needed. IDR isn’t a temporary relief program like a forbearance. Instead, it is a viable path to eliminate debt. After 20 or 25 years worth of IDR payments, borrowers can have their remaining balance forgiven.
Monthly Rent and IDR Payments: Unfortunately, your exact rent bill isn’t a factor in deciding how much you can afford on an IDR plan.
Instead, the Department of Education uses a simplified formula for determining discretionary income that considers family size.
Avoiding Temporary “Fixes” that Make Things Worse
When finances get tight, most people tend to focus on getting through this month or this year. While it may feel difficult to plan beyond the short term, long-term financial planning is essential with student loans.
Many lenders will offer a temporary forbearance or deferment on student loan payments. Pausing payments may seem helpful, but in many cases, it only makes things worse. Even though you are not required to make payments, interest still accrues. At the end of the payment pause, your balance will be larger and the monthly bill will be higher.
A forbearance or deferment might help if you are temporarily laid off or you are waiting to start a new job. However, if you are currently doing the best you can, and you don’t see things changing before the payment break ends, a deferment or forbearance is likely a mistake.
Borrowers should focus on putting together a plan to eliminate their debt. Temporary fixes will only make things more difficult in the long run.
Getting a Break from Private Lenders
Private lenders are notoriously ruthless when it comes to student loan bills. This is especially true for borrowers who fall behind or enter collections.
Don’t get shamed into making a student loan payment that you cannot afford. Keeping a roof over your head and food in your belly is more important than your student loan payment.
Any payment made should be part of a long-term plan to eliminate debt. For some borrowers this means pursuing forgiveness. For others, it means repayment in full.
Even though things are more difficult with private loans and lenders, there are still opportunities for borrowers. In some cases, calling your lender to work out a reduced payment schedule or lowered interest rates can make a big difference. If your credit score is solid, refinancing at a lower interest rate can also work.
If your payments are unreasonably high and your lender won’t work with you, consider filing a complaint with the Consumer Financial Protection Bureau. These complaints help shine a light on shady lender practices and help borrowers find the student loan assistance they need.
Aggressively Pursue Lower Interest Rates
Interest is the enemy of student loan borrowers. It is literally a daily fight to keep loan balances from spiraling out of control.
I’ve put together a list of 13 different ways borrowers can get lower interest rates on their student loans. Many of these options may not apply to your current circumstances. Some probably will.
Slight differences in your interest rate can make a big difference in your life. Finding the right strategies and opportunities can make life with student loans far more manageable.
Dealing with Monthly Rent Changes
Rental prices are currently spiking across much of the United States.
Many tenets face a difficult decision: find a way to pay an even higher monthly rent or move. For the 1 in 4 renters who currently spend over half their monthly income on rent, a price increase is devastating.
Fortunately, there are some resources available to help pay rent. Comprehensive lists of resources can be found at the Consumer Financial Protection Bureau and the National Low Income Housing Coalition.
Sherpa Tip: Markets go up and down.
Right now, inflation is on the rise, and prices are moving up. However, this is not a permanent situation.
If the trends reverse, renters may be able to get monthly rent reductions from their landlords. As the market changes, some landlords may willingly reduce rent prices if it means keeping a good tenet and not having to fill a vacancy.
You Are Not Alone
Many lenders and collections agencies use aggressive tactics to guilt borrowers into making student loan payments they can’t afford.
Your bank account balance has nothing to do with your worth as a person.
Don’t fall into the trap of thinking you did something wrong or that you deserve brutal financial circumstances. Millions of Americans are struggling to manage their student loans and make rent payments.
If you are reading this, it means you just read a long article about student loan repayment for people struggling with rent. My usual advice for people facing tough times is not to ignore their loans. You clearly are not making that mistake. If you are here, my advice is simple: do what you can, and cut yourself some slack. Student loan repayment is already hard enough. Don’t make it even harder by beating yourself up.
As always, if you have some questions, feel free to send me an email.
