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What Is The Best Repayment Strategy For Your Student Loans?

I have heard from many prospective clients this month that are seeking help for strategies for repaying their student loans.  Many are confused about what the suspension of interest and principal on their student loans means for them, and most people are trying to determine the best course of action to take when they need to begin repaying their loans in October.

Payments are currently suspended without interest for most borrowers with direct federal loans through September 30, 2021. If you want to pause your payments during this time, you do not need to take any action.  This will automatically occur on your eligible direct federal loans.  If you are working towards obtaining Public Service Loan Forgiveness or forgiveness under an income driven repayment plan, these months will count toward loan forgiveness.  If your goal is to repay your loans as quickly as possible, you can make payments during this time, and the payments will be applied to the principal of your student loan.

If you have FFEL loans, more than likely these are not eligible for the suspension of payments since most of these loans are commercially held.  

The beginning of the year is a great time to look at your options for repaying your student loans.  When I work with clients, I first determine which income driven repayment plans they qualify for.  Eligibility for some plans is dependent upon having a Personal Financial Hardship or by the dates the loans were distributed to the borrower. Once we determine which plans are available to the borrower, I run projections showing the monthly payments, the length of time the payments will be made, and the total amount that will be paid over the life of the loan.  I also look at whether it makes sense for the married borrowers to file their taxes separately or jointly to potentially obtain a lower payment.

For clients with large student loan balances, we need to determine the optimal strategy for repaying these loans before we can determine how much they will be able to save for other financial goals.  Obtaining the best loan strategy for student loans  can make a huge difference in the outcome of the financial plan.

I was recently featured in debt.com in an article "What To Do About Student Loans in 2021"  Here is a link to this article.


If you would like to organize, grow and protect your assets in 2021, please contact me!

About the Author

Patti Hughes is a Chicago Fee-Only Financial Planner.  Lake Life Wealth Advisory Group provides comprehensive and objective financial planning, retirement planning, and investment management to help clients organize, grow and protect their assets through life’s transitions.  She is a fiduciary, and does not sell products or earn commissions, so she truly acts in the best interests of her client