Are you looking for student loan assistance?
You’re not alone. There are more than 44 million borrowers with $1.3 trillion in student loan debt in the U.S.
Student loan repayment assistance programs, or LRAPs, help you make monthly payments on your loans so that you can afford groceries and other bills. They’re a viable option to help graduates stay on top of payments while securing their first job.
But navigating the programs available can be overwhelming. How do you know what to look for in a student loan assistance program? How do you know you’re not being taken advantage of?
Before signing up with any program, do your research. In this post, we’ll show you three questions to ask loan assistance programs to make sure it’s a right fit for you.
1. How Does the Student Loan Assistance Program Provide Payment?
First, you must understand how the LRAP you’re considering working with provides payment. Make sure the LRAP payments fit the requirement of the federal programs. Most LRAPs work well with federal relief programs.
For example, if you earn Public Service Loan Forgiveness Processing, you’re required to make 120 qualifying monthly payments. Some LRAPs will, unfortunately, provide a lump sum payment. This covers a number of monthly payments directly to your loan servicer.
The lump sum payment the LRAP gives you will likely count as one payment toward those 120 that you need to earn loan forgiveness. If that’s the case, expect to make additional monthly payments on your own.
Otherwise, you can delay your progress toward forgiveness. In that case, the LRAP might not be worthwhile for you. Either re-evaluate it or ask the provider to change how it disburses payments.
2. What Are Your Obligations?
You’ll want to do a cost-benefit analysis of an LRAP. Use factors such as how much support the program will provide, how much it costs you to apply, and the obligations the program requires of you. You have to read the fine print to make sure the LRAP is a benefit to you.
When looking at the amount of funding the LRAP provides, take into account:
- Minimum and maximum grant amounts
- The maximum number of years they’ll assist you
- Which of your loans are eligible for repayment
- If there are any income caps that can prevent you from receiving funds
- If you can combine the fund with other LRAPs
Also, analyze the LRAP’s website to see what your chances are for receiving support before you apply. Does their website say how many awards they grant each year and how many people apply?
Some LRAPs prioritize applicants who have received degrees from state schools or work in a particular location. They also may prioritize based on if you are employed in a limited number of eligible fields. Knowing if these circumstances fit your career plans can help you assess your chances of being accepted.
3. What Will Your Tax Liability Be?
Some LRAP funding may not be taxable. Often LRAPs associated with a college or university will not have taxable funding.
However, LRAPs through an employer will likely count as taxable income. Be sure to think of your tax situation when considering your LRAP options.
Get Your Student Loan Assistance in Check
Student loan repayment is the price we pay for good education. When considering your loan assistance program options, take these three questions into account. With the right support, you can confidently chop away at your student loan debt.