Before College: Don’t Let Bachelor’s Degrees Become Even More Unaffordable to Middle-Class Students!

Are you “middle-class”? Do you want your children to go to get bachelor’s degrees? Well, you’ve got a problem, because such degrees are fast becoming unaffordable for families like yours.

Median Household Income (MHI) is right at the center of middle-class earnings. The latest data show MHI in the U.S. to be $63,179. A year at today’s average public 4-year university costs $26,590 for everything — tuition and fees, books and supplies, room and board, transportation, and other basic expenses. That’s 42% of MHI. Can you afford to spend 42% of your annual income to send a child to college?

And things are getting worse. Public 4-year institutions have always been affordable pathways to bachelor’s degrees. But rising costs are bringing that to an end. Four-year university costs grew 144% over the last 20 years, while MHI increased just 62%. Should these trends continue, over the next two decades the cost of going to a public 4-year college will grow to almost $65,000, or 63% of MHI.

Of course, there’s always financial aid and student loans. But, unfortunately, they’re not keeping pace with rising higher education costs, either.

The country’s biggest program for students needing financial assistance is Federal Pell Grants, but households with incomes of $40,000 or more get just 26% of Pell recipients and 18% of Pell dollars.

Furthermore, the portion of the average public 4-year university’s cost covered by the maximum Pell Grant slipped from 39% to 23% over the last two decades. This forced states and institutions to devote more of their grant funds to help their lowest-income students go to and stay in college. Result? Shrinking amounts of state and institutional grants for needy middle-class students.

Furthermore, Congress last set the annual limits for federal student loans in 1996. Thus the costs they cover for public university freshmen dwindled from 50% in 1999-00 to just 21% in 2019-20.

So if you’re middle-class, what should you do? Here are a few ideas:

  • You (and your children) should save and invest every possible penny for college;
  • Have your children shorten their time at a university while they’re in high school by steering them into transferable AP and dual credit courses; and
  • Forgo the status symbol that comes with going to a university right after high school and have your children generate big savings by living at home and taking transferable courses at a community college for a year or so after high school — today, average community college costs are about 1/3 of 4-year university costs.

You should also push your lawmakers for funding and policies that’ll make bachelor’s degrees more affordable. We’ll look into what’s brewing in Washington next Wednesday.

Need help identifying strategies to keep college costs from cutting your children off from bachelor’s degrees? Contact College Affordability Solutions at (512) 366-5354 or to arrange a no charge consultation.

After College: Common Student Loan Repayment Q and As

College Affordability Solutions gets approached by many student loan borrowers trying to mange the repayment of their federal college debts. Here are some of the most frequent questions they ask . . .

Q-1. Am I “locked in” to the repayment plan I originally selected?

No. You may change your repayment plan at least every 12 months. So annually assess whether another plan would better meet your needs. If so, contact your federal loan servicer to get that repayment plan.

Q-2. I’ve got some extra money. May I make a payment before I’m required to do so?

You bet! If you’ve got debt from federal Unsubsidized Loans, Graduate PLUS Loans, or Parent PLUS Loans the interest on them has been accumulating ever since you got them. If left unpaid, that interest eventually gets capitalized, or added to your debt’s principal, so it’ll cost you more to retire your debt. But paying before you’re required to do so eliminates or reduces that interest.

Q-3. My loan servicer sent me a repayment schedule showing the date my monthly payments are due, payment amounts, and how long I’ll make payments. Do I have to accept all this?

Not necessarily. You have options. Review your repayment schedule for information on how to check out all federal repayment plans. Select the one that best fits your needs. You may also change your monthly payment due date to another day within the month. And you may want to borrow an FDLP Consolidation Loan to lower your monthly payments by stretching out your repayment period.

Q-4. I can’t afford to make my next monthly payment. What should I do?

If you’ve got a temporary problem, talk to your servicer about postponing or reducing your payments through a deferment or forbearance. If you’re situation will last longer than a few months, your best option may be to use the Federal Direct Loan Repayment Estimator to compare your monthly payment amounts under all FDLP repayment plans for which you’re eligible. Then you may request that plan from your loan servicer. Or it may be best to borrow an FDLP Consolidation Loan to lower your monthly payments by extending them.

Q-5. Is loan forgiveness available after I make payments for certain number of years using conventional repayment plans?

No. Conventional repayment plans don’t provide forgiveness for what’s left of your debt after a specified number of years. And of those plans, only the Standard 10-Year Repayment Plan can qualifies you for Public Service Loan Forgiveness (PSLF). But you can’t get PSLF by starting with the Standard 10-Year Plan, only if you finish making payments under that plan after losing eligibility for income-driven repayment plans.

Do you have questions about repaying your student loans? Let College Affordability Solutions put its 40 years of student loan experience to work helping you. Call us at (512) 366-5354 or to arrange a free consultation.

After College: Federal Direct Consolidation Loans May Be, But Aren’t Always, Helpful

Over the last few weeks we’ve described all the Federal Direct Loan Program (FDLP) repayment plans. Today we examine another strategy for managing FDLP debt repayment — an FDLP Consolidation Loan.

Consolidation will probably give you more than 10 years to repay under the FDLP’s conventional repayment plans. Specifically:

  • An outstanding balance of less than $7,500 gets a 10 year repayment period;
  • An outstanding balance of $7,500 to $9,999 gets a 12 year repayment period;
  • An outstanding balance of $10,000 to $19,999 gets a 15 year repayment period;
  • An outstanding balance of $20,000 to $39,999 gets a 20 year repayment period
  • An outstanding balance of $40,000 to $59,999 gets a 25 year repayment period; and
  • An outstanding balance of $60,000 or more gets a 30 year repayment period.

Longer repayment can significantly lower your monthly payments, which is helpful if you want to use a conventional repayment plan but can’t afford what you’d pay each month within it’s normal 10 year length. But a longer repayment period also means your debt will be outstanding much longer and it’ll cost lot’s more of your lifelong earnings to repay it.

Another advantage of FDLP Consolidation Loans is that you keep almost all the borrower benefits — deferment, forbearance, etc. — available on your other federal Loans. Using a private refinancing loan instead of an FDLP Consolidation Loan means you lose these benefits.

FDLP Consolidation Loan interest rates are always rounded to an even one-eight of one percent. So, for example, if loans you consolidate currently have a combined interest rate of 5.38%, that’ll rise to 5.50%. This is a slight increase, but it’s an increase nonetheless.

Would you consolidate both subsidized and unsubsidized FDLP Loans? If so, your Consolidation Loan’s interest will be both subsidized and unsubsidized in proportion to the subsidized and unsubsidized debts you consolidate.

You may consolidate anytime after leaving college, but be careful. Consolidating during your grace period will start your monthly payments during that period unless you indicate on your FDLP Consolidation application that you want consolidation delayed until your grace period concludes. Then payment will begin up to 60 days after grace-end.

What would be the monthly payment amount, repayment period length, and total amount you’d repay with an FDLP Consolidation Loan? You may request this information from your loan servicer before consolidating.

You can use any repayment plan if you consolidate, but you must use an income-driven repayment plan to get Public Service Loan Forgiveness (PSLF) 10 years after consolidating. If PSLF isn’t for you, income-driven repayment also qualifies you for forgiveness on anything you still owe 20-25 years of payments on your FDLP Consolidation Loan.

Consolidation also creates a brand new debt that repays any federal (but not non-federal) college loans you choose, giving you just one federal debt. But Washington places all your FDLP Loans with one loan servicer, and it’s required to combine those loans into one account mimicking a single debt, so you may not need to consolidate if you only have FDLP debt.

For more information, review the government’s official loan consolidation webpage.

For low-income and/or high-debt borrowers, consolidation is a fundamental strategy for keeping FDLP payments affordable. Look into it, and if it’ll help meet your repayment needs, go for it!

Let College Affordability Solutions use its four decades of student loan experience help you select workable strategies for repaying your higher education debt. Call (512) 366-5354 or email to set up one or more free consultations with us if you need help.

After College: Revised Pay As You Earn — Could It Be The Best Plan for Repaying Your Student Loans?

This concludes our review of the Federal Direct Loan Program‘s (FDLP’s) conventional repayment plans and income-driven repayment plans, including Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn. Today we’ll examine the last of those income-driven plans, Revised Pay As You Earn (REPAYE).

There’s a simple way to project what REPAYE can do for you. Just use the government’s Loan Simulator to find out:

  • Your monthly loan payment amount, at least for your first year in REPAYE (to use REPAYE for any 12-month period, you need to apply for it and certify your latest Adjusted Gross Income (AGI),
  • How many months REPAYE gives you to zero out your debt;
  • The total amount you could end up spending to eliminate your FDLP debt;
  • Whether any of your debt will be forgiven; and
  • How REPAYE compares to other FDLP repayment plans.

Here are REPAYE’s details . . .

REPAYE can significantly lower your monthly FDLP payments, especially if those payments would be unaffordable given your income. To do this, REPAYE will schedule you to eliminate your FDLP debt in 20 years if you borrowed your student loans as an undergraduate, and 25 years if what you borrowed was for graduate or professional school. So as with other income-driven plans, the downsides of REPAYE are debt that’s outstanding longer and costlier to pay off.

But REPAYE also puts you in line for Public Service Loan Forgiveness (PSLF) if you’re otherwise qualified for it. Not PSLF-qualified? REPAYE forgives what you still owe the FDLP after making monthly payments for 20 years.

REPAYE is the only income-driven repayment plan that’ll limit your monthly FDLP payments to no more than 10% of your discretionary income. But your discretionary income varies with your family and tax situation. It always includes your AGI minus 150% of the federal poverty level for your family size. However, if you’re married and you file a joint tax return, it also includes your spouse’s AGI. Your spouse’s student loan debts are also used to set your monthly payment amount under REPAYE if you’re married and filing jointly.

You may use REPAYE for any loans you borrowed from a federal postsecondary educational loan program as a student. This includes student loans you borrowed from the FDLP and any FDLP Consolidation Loan that eliminated and took the place of your FDLP student loans. It also includes your student loan debts that began in the Federal Family Education Loan and Federal Perkins Loan Programs provided you consolidated them into the FDLP. Unfortunately, Parent PLUS Loans and FDLP Consolidation Loans that absorbed Parent PLUS Loan debts aren’t REPAYE-eligible.

Remember, there are eight different repayment plans for paying off FDLP debt. You need to think carefully about your career, financial, and personal circumstances, then select the plan that best meets your needs. Do this and you’ll find that your monthly FDLP debt payments will be much more affordable!

If you graduated last spring, you’ll be soon required to begin repayment on your federal student loan debt. But do all the repayment plans out there boggle you? Could you could some professional advice? College Affordability Solutions can help you with four decades experience in running federal college loan programs. Call at (512) 366-5343 or email us at to arrange a free consultation.

After College: Can “Pay As You Earn” Help You Repay Your College Debt?

There are eight different approaches to repaying Federal Direct Loan Program (FDLP) debt. Four of them base your monthly payment amount on your income. One of these is called Pay As You Earn (PAYE).

PAYE gives you up to 20 years to pay off your FDLP debt, which can reduce your monthly payments by having them equal 10% of your discretionary income (see below) but never more than what they’d be under a 10-year Standard Repayment Plan.

PAYE is also one of the repayment plans you need to get into to pursue Public Service Loan Forgiveness (PSLF). But even if PSLF isn’t in your future, PAYE will forgive anything you’ll still owe after 20 years of payments.

The downsides of PAYE? A 20-year repayment period means your FDLP debt can be outstanding for a longer time. It also means you’ll accumulate more interest on that debt, so it’ll cost you more in the long run to fully eliminate it.

As with other income-driven repayment plans, you can use PAYE only for certain federal student loans. These include loans you borrowed as a student — FDLP and Federal Family Education Loan Program (FFELP) Subsidized, Unsubsidized, Graduate PLUS Loans, and also Federal Perkins Loans. They’re also FDLP Consolidation Loans you borrowed to repay and replace your student loans. But Parent PLUS Loans and FDLP Consolidation Loans you borrowed to repay and replace Parent PLUS Loans aren’t PAYE-eligible.

Also, not every borrower is PAYE-eligible. You can get it only if you owed nothing on a FDLP or FFELP Loan as of October 1, 2007 and you received FDLP Loan funds on or after October 1, 2011.

Additionally, you must have a “partial financial hardship” to be eligible for PAYE. You have this hardship if you are:

  • Unmarried or Married but Filing an Individual Federal Tax Return: Under a Standard Repayment Plan of 10 years, the annual amount you’d pay on your eligible loans each month — using the greater of what you owe when you begin repayment or what you owe when you apply for PAYE — would exceed your discretionary income.
  • Married and Filing a Joint Federal Tax Return: The annual amount you and your spouse would pay on you and your spouse’s eligible loans under a 10-year Standard Repayment Plan — again, using the greater of what you owe upon beginning repayment or upon applying for PAYE — would exceed you and your spouse’s discretionary income.

What’s discretionary income? For PAYE, it’s the difference between your and, if you’re married and filing your taxes jointly, your spouse’s Adjusted Gross Income, minus 150% of the federal poverty line for your family size.

To see if you’re eligible for PAYE, and how much PAYE would initially require you to pay each month, the easiest thing to do is to use the Federal Student Loan Repayment Estimator.

PAYE is yet another plan you should consider for eliminating your FDLP debt. But remember, get into it only if it meets your needs.

Trying to figure out which repayment plan you should use? College Affordability Solutions uses its four decades of student loan administrative and policy experience to provide borrowers with free consultations. Email or call (512) 366-5354 to arrange such a consultation.

After College: Income-Contingent Repayment May Meet Your Federal Student Loan Repayment Needs

In mid-October we reviewed Income-Based Repayment (IBR), a popular income-driven approach to repaying Federal Direct Loan Program (FDLP) debt. Today we’ll look at another FDLP repayment option that’s tied to what you earn — Income-Contingent Repayment (ICR).

Like all repayment plans, ICR has certain pros and cons:

  • Pros: ICR can provide you with a way to make your monthly FDLP payments more affordable, especially if what you would otherwise be required to pay eats up a big chunk of your monthly income. It does this by giving you up to 25 years to pay off your FDLP debt, and it will forgive any of that debt you may still owe after 25 years of payments.
  • Cons: By spreading your repayment out to as many as 25 years, ICR can keep your FDLP debt out there for a much longer period than it would otherwise be under one of the FDLP’s conventional repayment plans. It will also result in you spending more of your lifetime earnings on FDLP Loan repayment.

ICR can be used to repay any FDLP Loans you borrowed while you were a student — Graduate PLUS Loans, Subsidized Loans, and Unsubsidized Loans. All other types of federal student loans, including but not limited to Parent PLUS Loans, must be repaid and replaced by an FDLP Consolidation Loan to be included in an ICR Repayment Plan.

The legal and regulatory requirements for determining your exact monthly payment amount under ICR are exceedingly complex so, rather than going into the details of all that federal gobbledygook, we recommend you use the Federal Student Loan Repayment Estimator to figure out what you’ll be required to pay under ICR, at least initially.

To initially get ICR, you’ll submit an Income-Driven Repayment Plan Request and an income certification. You can do this online or on a paper form you may request from the loan servicer hired by the government to collect your FDLP debt.

To keep using ICR, update your Income-Driven Repayment Plan Request and your income certification every 12 months. Should you fail to do this, your monthly payment amount will go to what you’d pay under the Standard Repayment Plan, which usually requires the highest monthly payments of all FDLP repayment options.

Remember, you should use the FDLP repayment plan that best meets you needs given your career, financial, and personal circumstances. That may be ICR, IBR, or one of the FDLP’s conventional repayment plans. Or it may be the Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE) plans. More about those later this week.

Trying to figure out the best approach to manage and repay your student debt? Contact College Affordability Solutions at (512) 366-5354 or for a free consultation if we can help.