5 Student Loan Secrets You Should Know

If you’re still paying off student loans and expect to do so for a long time to come, then you might think that you know everything there is to know about them. However, there are some concepts associated with student loans that many college graduates don’t know about.

Here are 5 student loan secrets you should know.

1. Co-Signer Releases Aren’t That Simple

You might have secured a loan with the aid of a co-signer. Maybe a parent or some other generous relative co-signed for the loan as a way to help you further your education.

However, the co-signer might have been reluctant to sign on the proverbial dotted line. As a result, you offered some reassurance that your generous co-signer could be released from the loan in as little as a year if he or she started to get cold feet.

So everything’s cool, right?

Not necessarily. It’s at the discretion of the lender to allow the release. That means your generous relative could be stuck worrying about the loan if you lose your job or suddenly have trouble making ends meet.

2. Don’t Count on Public Service Forgiveness

You might think that if you’re in a bind and have trouble paying off the loan, you can get out of it by going down the public service forgiveness road. That’s when you work for the government for 10 years and your debt is completely forgiven.

As with so many other things in life, there is a “rest of the story.” For example, the fine print (which you may or may not have read) indicates that your years of payments won’t count towards forgiveness. That could be a harsh reality you might have to face if you want to try the public service forgiveness option about halfway through the life of your loan.

3. Customer Service is a Joke

If you’ve opted for a federal loan program as opposed to one of the many private student loans that are available, then you’ll likely be working with Sallie Mae or Navient at some point. Unfortunately, customer service at those organizations is known to be sub-par.

You might call the hotline asking for assistance or information about your student loan and will find that the desired help is not forthcoming. Sometimes, you might get the wrong answer from the customer service rep. It can be a mess.

The good news is that there are steps being taken to hold Sallie Mae and Navient more accountable. For now, though, you might have to brace yourself every time you call in for help.

4. You Have Repayment Options

It may be the case that you’re paying down your loan using the default, 10-year schedule. If so, then you’ve selected the highest monthly payment plan.

You have other options.

Take out your student loan payoff calculator and run some numbers. Find your optimal monthly payment for a payoff period. Then, find an option that suits your current income stream. You might even find something with a lower interest rate so that you can pay off the loan in the same period of time (10 years) but still pay less every month.

5. A Forgiven Loan Could Cost You in Taxes

If, for whatever reason, your loan is forgiven, the IRS might declare the balance of your forgiven loan to be income. In that case, you’ll likely owe taxes on it.

Check with your tax adviser about how much you’ll owe in taxes if your loan is forgiven. You might find that it’s better to just find a way to pay it off.

Student loans can be complicated. There’s a great deal of fine print and no shortage of paperwork associated with them. Still, you stand to benefit if you understand some of the secrets associated with the student loan program.