In Spanish | Young people just starting out in their careers may be the frontrunners of college debt, but a growing percentage of older Americans are bogged down by student loans.
Of the $ 1.6 trillion in student debt owed by Americans in 2020, people aged 50 and over accounted for about $ 340 billion, up from $ 47.3 billion in 2004, according to the Federal Reserve Bank of New York.
Such financial obligations can put a damper on retirement savings, says Ben Reynolds, founder of “Sure Dividend,” a newsletter for long-term investors. “People nearing retirement or retirement who aren’t bothered by student loans don’t have the burden of maintaining those monthly payments, freeing up more money for retirement accounts and investments,” says Reynolds .
One way to alleviate some of the burden is to use the Public Service Loan Cancellation Program (PSLF), which allows borrowers who work in public sector jobs – such as government, public education and law enforcement – to have their loans in arrears after making 10 years of payments. Here is what you need to know to take advantage of the civil service loan forgiveness.
Understand the requirements
In order to receive a student loan forgiveness, you had to make 120 qualifying payments on time, which means the payment had to match the total monthly amount owed and paid within 15 days of the due date. Under the new rules announced on October 6, any previous payment made will be considered an eligible payment, regardless of the type of loan, repayment plan, or whether payment was made in full or on time. All you need is a qualifying job.
This change will apply to student loan borrowers with direct loans, those who have already consolidated in the direct loan program, and those consolidating in the direct loan program by October 31, 2022.
While you typically won’t get credit for months without making a payment, this is not the case during the pandemic. To provide relief to borrowers during the COVID-19 crisis, payments and interest on student loans have been suspended until January 31, 2022. However, those months will count for the PSLF even if you don’t pay a dime.