As a skilled trades worker, you have likely invested heavily in your education and training. Unfortunately, this can often translate to large student loan debt. The good news is that there are several repayment plans available to help you crush your student loans and take control of your financial future.
In this blog post, we will explore the best repayment plans for skilled trades workers, including their features, qualifications, and benefits. We will also provide verified facts, figures, and statistics to help you make an informed decision about which plan is right for you.
1. Standard Repayment Plan
The standard repayment plan is the default plan for federal student loans. It has a fixed monthly payment of at least $50 for a period of 10 years. This plan is best for those who can afford to pay off their loans quickly and want to minimize the amount of interest paid over time.
According to a report by the Institute for College Access & Success, the average student loan debt for skilled trades workers is $39,155. Under the standard repayment plan, this would translate to a monthly payment of approximately $425 over 10 years. The total amount paid over the life of the loan would be $51,058, including $12,903 in interest.
While this plan is straightforward and can help you pay off your debt quickly, it may not be the most affordable or feasible option for everyone.
Bottom Line: The standard repayment plan is a good option for those who want to pay off their loans quickly, but may not be feasible for those with lower incomes or larger loan amounts.
2. Graduated Repayment Plan
The graduated repayment plan starts with lower monthly payments that gradually increase over time, usually every two years. This plan is best for those who anticipate a steady increase in income over the next decade and want a more manageable payment plan in the short term.
Under this plan, the minimum monthly payment is usually lower than the standard repayment plan, but the total amount paid over the life of the loan may be higher due to the longer repayment period. For skilled trades workers with an average debt of $39,155, the monthly payment could start at $225 and increase to $584 over a 10-year period. The total amount paid over the life of the loan would be $62,730, including $23,575 in interest.
Bottom Line: The graduated repayment plan is a good option for those who expect to see a steady increase in income over the next decade and want a more manageable payment plan in the short term.
3. Income-Driven Repayment Plans
Income-driven repayment plans are best for those with lower incomes or higher loan amounts who need a more affordable repayment option. These plans calculate your monthly payment based on your income and family size, and they adjust annually as your income changes. There are four main income-driven repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR).
Under these plans, the monthly payment is usually capped at 10-20% of your discretionary income, depending on the plan. Discretionary income is defined as the difference between your adjusted gross income and 150% of the federal poverty guideline for your family size and state of residence. For example, the poverty guideline for a family of four in the contiguous United States is $26,500 in 2021. If your adjusted gross income is $50,000, your discretionary income would be $15,550 ($50,000 – (($26,500 x 150%) / 4)).
For skilled trades workers with an average debt of $39,155 and a family size of four, the monthly payment under the PAYE or REPAYE plan could be as low as $73, depending on income. The total amount paid over the life of the loan could be as low as $19,851 over 20 years, including $6,696 in interest.
Bottom Line: Income-driven repayment plans are a good option for those with lower incomes or higher loan amounts who need a more affordable repayment option.
4. Public Service Loan Forgiveness
If you work in a public service job, such as a government agency or non-profit organization, you may be eligible for Public Service Loan Forgiveness (PSLF). This program forgives the remaining balance on your federal student loans after you make 120 qualifying payments while working full-time in a qualifying public service job.
To be eligible for PSLF, you must make all 120 qualifying payments under an income-driven repayment plan or the standard repayment plan while working for a qualifying employer. According to the U.S. Department of Education, skilled trades workers are eligible for PSLF as long as their employer is a qualifying organization.
For skilled trades workers with an average debt of $39,155, PSLF could save them approximately $39,155 in loan forgiveness after 10 years of service.
Bottom Line: Public Service Loan Forgiveness is a good option for those who work in a qualifying public service job and want to have their student loans forgiven after 10 years.
In conclusion, skilled trades workers have several repayment options available to help them crush their student loans and take control of their financial future. From the standard repayment plan to income-driven repayment plans and Public Service Loan Forgiveness, there is a plan for everyone, depending on their financial goals and circumstances. By understanding the features, qualifications, and benefits of each plan, skilled trades workers can make an informed decision about which plan is right for them.
The bottom line is that student loan debt can be overwhelming, but it doesn’t have to be. With the right repayment plan, you can take control of your finances and achieve your life goals without sacrificing your financial stability.
> For one on one or group assistance with personal finance, STR recommends that you check out the following resources:
> Inaccuracies with Bureau of Labor Statistics (BLS) data: Many of our blog posts will quote BLS data. SkilledTradeRescue.com has been able to identify that data quoted specifically for Skilled Trades can be as much as 50% LOW in many USA labor markets. For more information on these inaccuracies please visit the STR national labor survey page at the link below. On this page there is a video containing the latest information at the top of the page as well as other information. If you currently work in skilled trades, PLEASE consider participating in our national labor survey.
