4 Sources for Repaying Your Student Loans — So You Don’t Have To
Wouldn’t it be nice if someone else would help pay off your student loans?
It might not be as far fetched as you think (and no, you don’t necessarily need a rich relative).
If you’ve been taking advantage of the payment-free, interest-free forbearance period thanks to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the reprieve from payments may have left you fantasizing about never paying student loans again.
But the pending Sept. 30 deadline for the forbearance will put you back on the hook for paying your student loans.
Although it’s possible additional legislation could extend the deadline, there are no guarantees. And ignoring student loans will only make the situation worse and harder to recover from.
But just because your student loans need to be paid doesn’t mean you need to pay them. Check out these four alternative sources of money specifically for paying back student loan debt.
4 Sources for Paying Off Your Student Loans — Besides You
It’s not like you’re shirking your duties by seeking outside assistance — in fact, finding a source to pay off your student loan debt could be a smart money move.
So now that you’re OK with letting someone else to pay off your student loan debt, here’s who to ask.
1. Your Employer
Why not ask your boss to pay your student loans?
It’s not (quite) as ridiculous as it sounds — 8% of businesses helped employees with student loan payments in 2019, according to a survey by the Society for Human Resource Management.
Find out if your employer participates in a student loan repayment assistance program (LRAP) by checking the benefits section of your employee handbook or by contacting your HR department.
And thanks to the CARES Act, employers can now make those contributions tax-free up to $5,250 through Dec. 31, 2020. Prior to the CARES Act, employer-based student loan payments counted as taxable income — for now, it’s more like a 401(k) contribution.
2. Your Family
Yes, you can hit up the parents and gran for cash, but why not use the money they already gave you via your 529 plan.
Turns out, if you didn’t use all the money in that account (maybe you forgot or you added more money throughout your college career), you can now use 529 funds to pay off student loans.
Thanks to the Setting Every Community Up for Retirement Enhancement Act of 2019 — aka Secure Act — you can use up to $10,000 from your 529 savings account funds to repay student loans. Previously, loan payments were not considered qualified expenses, which meant paying a penalty and taxes on the withdrawal.
Even if you don’t have the money in your own 529 account, you can still get help from your family. Siblings can use up to $10,000 from their 529 savings plans to contribute to your student loan payments. So be nice to your sister.
3. The Government
If you haven’t heard of student loan forgiveness, you could be missing out on letting old Uncle Sam pay off your federal student loans.
Eligibility for this option can depend on a number of factors, including your career — there are specific programs for teachers and nurses, for instance. You can also qualify for an income-driven repayment plan, which may reduce your monthly payment and wipe out the remaining balance on your student loans… after 20 to 25 years.
Forgiveness may not offer the quick-fix you’re looking for, but if you have a significant amount of student loan debt, one of these programs may be worth the wait.
4. The Military
If you’re willing to protect and defend, the military may be able to help you pay off your college loans.
As a service member, you’ll find multiple programs that will repay some — although not all — of your student loan debt.
Following a complete year of active-duty service, you’ll become eligible for benefits available through most branches of the service.
Is committing to active-duty service worth getting someone else to pay off your student loans? That’s up to you to decide.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.