Many debtors resort to financial advisors to solve their student loan debt problems and manage their finances better. Financial advisors also feel the debt burden. You have a lofty goal as you try to help your clients repay their student loan debt. Briefing about the student loan debt relief programs and guidance can help debtors solve their debt problems faster.
The pandemic has put more burden on debtors. Many people have lost jobs and are struggling to meet their daily needs. However, President Biden’s campaign of extending the pause on student loan payments until August 31, 2022 helped borrowers significantly during this difficult time.
Parents often consult a financial advisor to discuss using 529 plans to save their children’s college education. As an advisor, you can provide expert insight on choosing a plan and selecting appropriate investments.
But, many families end up with a savings gap when it’s time to pay for college. This presents a unique opportunity for you to add even more value by providing advice on borrowing student loans.
Now, coming to our main point of discussion – how to manage student loans during this time of the pandemic.
Biden’s Student Loan Plan – How Can it Help Debtors?
Most student loan forgiveness programs are catered towards federally backed student loans. Therefore, if your clients’ concern is paying back federal student loans, they can resort to various federal debt relief programs.
They can take advantage of income-driven repayment forgiveness programs, teacher loan forgiveness programs, student loan cancellation programs, student loan discharge programs and more.
As previously mentioned, the Biden administration has extended the student loan payment pause until the end of January 2022. This has been confirmed by the Department of Education to be the final extension of the interest waiver.
Biden initially proposed to cancel $10,000 of federal student loan debt per person as a part of the pandemic relief. That would have helped about 15 million borrowers to wipe out student loan debt entirely. However, no student loan forgiveness plan has come into effect yet.
With this in mind, your clients should choose a suitable debt relief plan to gradually repay student loan debt.
Should Financial Advisors Help Clients Pursue a Student Loan Debt Relief Program?
For some clients, it may be challenging to stay on track of debt relief programs. In most cases, debtors have to make repayments for several years. So, there’s a chance that a debtor may need to pause payments, such as in the event of a job change in between making payments. It can make it difficult to continue with the forgiveness program. However, if a debtor qualifies for the program, he or she should pursue it to get rid of student loan debt faster.
If your clients are doctors, dentists, lawyers, pharmacists, veterinarians, along with several other professions, then they can take advantage of state-offered relief programs.
As a financial advisor, you can also advise your clients to research any schools or private organizations that offer student loan debt relief programs. However, your clients need to decide whether or not it’s a good fit for them before pursuing a program.
As published in money.com, “The University of Virginia School of Law covers up to 100% of student loans for graduates who make less than $65,000 per year. The Florida Bar Foundation provides forgivable loans of up to $5,000 per year to help local lawyers pay off their student debt.”
Alternatively, you can also recommend your clients take advantage of the payment pause and interest waiver and pay down the principal amount on student loans as much as possible. This will help them repay the student loan debt faster.
Suppose your clients have other unsecured debts like credit cards, payday loans, and medical debt. They may decide to use a reliable debt consolidation or settlement program offered by a law firm to repay debts. As a financial advisor, you can review their financial situation and decide whether a consolidation or settlement program makes sense.
If your client has a good income, they can opt for consolidation and repay multiple debts through a single payment. However, if the debtor is overburdened with debt, then settlement can be the better option.
What if Your Clients Have Private Student Loan Debt?
If your clients have private student loans, they can use loan assistance repayment programs for qualifying professionals offered by certain states. Unlike the federal student loan forgiveness programs, some of these programs can help repay private student loans, too.
Clients with private student loan debt may also consider refinancing their student loans. Refinancing can help borrowers pay off debt faster by lowering the interest rate. Keep in mind, however, when you refinance a federal loan you lose some of the unique benefits and repayment options.
Whatever your client chooses, managing unsecured debts and paying them off faster can help free up of money every month. Your client can use this money to decrease the student loan debt fast and manage finances in a better way.