How to manage student loans during maternity leave

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If you are about to be a parent, whether it is for the first time or not, then you have probably been thinking about all the changes that are coming in your life, especially in the area of ​​finances. Having a baby changes your financial picture. If you take maternity or paternity leave, these changes can be even more pronounced.

If you have student loans in the process of paying off, you might be having trouble making monthly payments with a new baby, and you might be wondering how to make it work.

So how do you manage student loan payments while on maternity leave?

Here are the options available to student loan borrowers:

Postponement of family leave

If you have a Federal Student Loan, you can apply for Parental Leave / Working Mom Deferral, which gives you time without payment. Becoming a new mother is not a cause for automatic deferment, such as job loss or serious illness, so you will need to work directly with your service agent to request this type of deferment. Navient, one of the largest federal loan managers, offers information about this report on their website.

To be eligible, you must be pregnant or have a baby under six months old. You must prove this with a birth certificate or a doctor’s declaration confirming your pregnancy.

Also, you cannot work full time or attend school during the deferment period. If you hope ask for a stay without taking leave, your request will be refused. The maximum duration of an adjournment is six months.

Abstention

Withholding allows you to either make a smaller payment or to defer payments altogether. As with the postponement, you will need to contact your repairer and make a request. If approved, you can take time off your student loans while you’re not working. Just be aware that even during forbearance, interest continues to accrue, meaning your total balance will increase during this time.

Income Based Repayment Plan

If you’d rather keep making payments but just need a reduction in the amount, you can apply for a new income-based repayment plan. the Income Based Repayment Plan (IBR) caps your monthly payment at 10% to 15% of your discretionary income. And since this is also based on your family size, it will take into account that your family size has changed and your discretionary income has decreased. To apply, contact your loan manager.

Pay As You Earn Plan (PAYE)

Another option is the Pay as you earn (PAYE) plan, which allows you to pay 10% of your income, but only up to the amount you would have paid with the standard plan. Since income and family size are reassessed every year, this plan is ideal for growing families. It allows you to get a temporary stay with lower payments. Then, as you advance in your career and increase your income, your payment comes back on time. Your manager can help you set up the PAYE plan. Your spouse’s income is only taken into account if you are filing taxes as a married couple.

Revised pay plan as you earn (REPAYE)

Under the Review of compensation as you earn (REPAYED) plan, you will pay the same 10% of your income, with an annual reassessment of your situation. However, you will not have a break in calculating your spouse’s income. With REPAYE, all income counts, no matter how you file your taxes. The good news is that whatever is left on your balance will be forgiven after 20 years. Talk to your repairman to see if it’s a good fit.

Income contingent repayment plan (ICR)

The Income-Conditional Repayment Plan (ICR) is either 20% of your discretionary income or what you would pay on a fixed repayment for 12 years, whichever is less. Just like in the other options, you need to update your income and family size every year even if nothing has changed. In addition, you may have to pay tax on any amount remitted because the government considers it income. However, it works on subsidized, unsubsidized, PLUS, and even consolidation loans, and can be requested from your server.

Budget for a baby

There’s no getting around the problem: having a baby comes with a lot of new expenses. From things you will need to purchase before the baby arrives, to how much diapers, bottles, and other things your child will need in their first year, you’ll need to figure out how much it will cost and how to budget properly. for that. Babycenter.com has a calculator it can help you break down what your child will cost in any given year. You can divide this number by 12 to figure out the monthly costs.

Next, you’ll want to determine where you can cut back, if possible, to continue meeting your monthly student loan obligations. For some, that might mean eating less at restaurants and avoiding the afternoon latte. For others, it will require a complete restructuring of the budget, especially if you plan to take maternity leave that is not fully paid. Since most maternity leave goes unpaid, you’ll need to factor in any expenses, monthly bills, or other obligations that normally flow from your paycheck and add them to the budget for while you’re at home. House.

Once you understand what your finances will be like and have a working budget, don’t wait until your child arrives before trying to live with that budget. In fact, the sooner you start cutting back, the better. This way, you can get a head start on saving and you can also adjust any facets of your budget that prove to be impractical.

The bottom line

Having a baby is a joyful experience. But caring for a newborn brings enough stress without worrying about how you’re going to pay off student loans while you’re on maternity or paternity leave. The best time to plan for your new family member is long before you bring him home. Take the time to talk to your caregiver, budget, and prepare your finances for your baby.

Originally posted on loaned.

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