On Saturday June 3rd, President Joe Biden signed the long-awaited debt ceiling deal into law. The Fiscal Responsibility Act of 2023 averts the general economic chaos that could ensue if the U.S. defaulted on its domestic and foreign debts, and imposes cuts in federal spending.
The legislation also ends the three-year pause on federal student loan payments and interest accrual in effect since March 2020.
When Will Federal Student Loan Payments Resume?
According to the bill’s language, the federal student loan payment pause will end “60 days after June 30th,” or Aug. 30th.
Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October. The Department of Education will notify borrowers well before payments restart.
On June 30th, the Supreme Court ruled against President Joe Biden’s plan to forgive up to $20,000 in federal student loan debt for qualified loan holders, saying the president did not possess the constitutional authority to take such an action but that Congress should make such a decision.
The Department of Education is instituting a 12-month “on-ramp” to repayment, running from October 1, 2023 to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.
In addition to the “on ramp” program, Biden said he will strengthen a plan that reduces federal loan holders’ debt based on their income called SAVE.
For years, people who struggled to pay their federal student loans could enroll in the government’s Income-Driven Repayment Plans . Such a plan sets your monthly federal student loan payment at an amount that is intended to be affordable based on your income and family size. It takes into account different expenses in your budget.
The four income-based plans are: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR).
Biden said that his Administration is “creating a new debt repayment plan, so no one with an undergraduate loan has to pay more than 5 percent of their discretionary income.”
The Takeaway
The Fiscal Responsibility Act of 2023, commonly referred to as the debt ceiling bill, officially cancels the pause on federal student loan repayment and interest accrual at the end of August. Borrowers must now prepare to repay their loans this fall. Federal student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October.
Student loan refinancing is one way borrowers can seek to make student loan payments more manageable. Note that the refinanced amount will lose access to federal protections and programs, and you may pay more in interest over the life of the loan if you refinance with an extended term.
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SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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President Joe Biden vowed to keep fighting to deliver relief from federal student loan debt to millions of Americans hours after his plan was rejected by the highest court in the land.
The President said in a June 30 press conference he is changing the Department of Education’s income-driven repayment program “so no one with an undergraduate loan has to pay more than 5% of their discretionary income.”
Biden is also creating an “on ramp” program that will allow federal loan borrowers to not be considered delinquent if they miss a payment from Oct. 1, 2023 to Sept. 30, 2024. The president says the Education Department won’t refer borrowers who fail to pay their student loan bills to credit agencies for those 12 months, to give borrowers time to “get back up and running.”
The U.S. Supreme Court struck down Biden’s student-loan forgiveness plan in a 6-3 ruling released earlier on June 30, saying that the Biden Administration did not have the authority to forgive federal student loan debt for more than 43 million loan holders without Congressional approval.
Biden’s One-Time Forgiveness Plan That Was Rejected
Biden’s targeted debt forgiveness plan, announced in August 2022, would have erased up to $20,000 in federal student loans for individuals making less than $125,000 or households with less than $250,000 in income. Some 26 million U.S. borrowers applied for relief before the program was halted due to legal challenges.
At least 20 million people could have been approved and seen their federal loan debt erased entirely if the program had gone through, according to the administration. The plan could have wiped out more than $400 billion in federal student debt.
In a statement released June 30 after the Supreme Court ruling, President Biden said his plan would have been “life-changing for millions of Americans and their families.” He said, “Nearly 90 percent of the relief from our plan would have gone to borrowers making less than $75,000 a year, and none of it would have gone to people making more than $125,000.”
The Supreme Court’s Ruling
However, the court majority said that President Biden exceeded his constitutional authority in the debt forgiveness program. After hearing arguments in February, the court held that the administration needed Congressional authorization to take such action. The majority rejected arguments that a 2003 law dealing with student loans, known as the HEROES Act, gave Biden the power he claimed.
“Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree,” Chief Justice John Roberts wrote for the court.
Interest on all federal student loan debt, regardless of income, is set to resume accruing starting on Sept. 1, 2023, and payments will be due starting in October, per the debt ceiling bill.
Other Student Loan Relief Plans Draw Focus
In addition to the “on ramp” plan, Biden said he will strengthen a program that reduces federal loan holders’ debt based on their income. It is called the SAVE plan and is part of his effort to make student loan debt more manageable, especially for low-income borrowers.
Under SAVE, borrowers who are single and make less than $32,800 a year won’t have to make any payments at all. (If you are a family of four and make less than $67,500 annually, you also won’t have to make payments.)
For years, people who struggled to pay their federal student loans could enroll in the government’s Income-Driven Repayment Plans . Such a plan set your monthly federal student loan payment at an amount that was intended to be affordable based on your income and family size. It has taken into account different expenses in your budget.
The four existing income-based plans are: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). The SAVE plan replaces the REPAYE program.
Supreme Court Ruling Draws Strong Response
Supporters of Biden’s federal debt forgiveness plan criticized the Supreme Court, saying student debt has become a national crisis. More than 45 million people collectively owe $1.6 trillion, according to U.S. government data.
The average federal student loan debt balance is $37,338, while the total average balance (including private student loan debt) may be as high as $40,114, according to educationdata.org.
Some called for President Biden to continue his push to slash federal student loan debt.
“I see it as an unfortunate reality that in a country where we bail out Fortune 100 companies, where we bail out banks that have not been good actors, that this Supreme Court would allow that to happen, and yet,” says Derrick Johnson, the NAACP’s president and CEO, the court would choose to leave millions of borrowers “stuck in a vicious cycle of debt.”
The Takeaway
President Joe Biden vowed to continue trying to provide federal student loan debt relief after the U.S. Supreme Court struck down his debt-forgiveness plan, saying the president did not have the authority to take such action.
One step his Department of Education has already taken to help financially strapped borrowers: it is instituting an “on-ramp” to repayment so that late payments will not be considered delinquent during the 12-month period from Oct. 1, 2023 to Sept. 30, 2024. The DOE will also offer a new SAVE program that lowers the percentage of income that repayment amounts will be based on.
SoFi’s Student Loan Help Center may be able to help
FAQ
Can I get my federal student loan debt canceled through the President’s plan?
The U.S. Supreme Court ruled against President Joe Biden’s debt forgiveness program for those whose household income falls below a certain cutoff. That debt cancellation plan, which received more than 25 million applications in 2022, is now blocked.
Is the pause in paying my federal student loan coming to an end soon?
Yes. Due to the debt ceiling bill recently passed by Congress, the pause in repaying federal student loans is ending, regardless of the Supreme Court decision. Interest on federal student loans will resume accruing on Sept. 1, 2023, and payments will be due starting in October. According to Federal Student Aid (FSA) with the Department of Education, “Once the payment pause ends, you’ll receive your billing statement or other notice at least 21 days before your payment is due. This notice will include your payment amount and due date.”
I don’t know who my federal loan servicer is — and what does the servicer do?’
A loan servicer is a company that Federal Student Aid (FSA) assigns to handle the billing and other services on your federal student loan on its behalf. A loan servicer can work with you on repayment options (such as income-driven repayment plans and loan consolidation ) and assist you with other tasks related to your federal student loans.
If you’re not sure who your loan servicer is, visit your account dashboard and scroll down to the “My Loan Servicers” section, or call the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243.
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SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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Saving for kids’ college expenses can be a massive undertaking, but a critically important one. If you’re a parent, you’ve probably heard the mantra that education is the key to a successful future for your child. You’re also likely aware that college isn’t cheap, and it isn’t getting cheaper.
The escalating costs of college may have you worried about how to pay for higher education. You’re smart to think about how to start saving for college, even if your kids are still young. If you truly want to give your child the gift of a college education and free them from overwhelming student debt, the time to plan is now.
Key Points
• Start saving early to take advantage of long-term growth and compound interest.
• 529 Plans offer tax-advantaged ways to save for qualified education expenses.
• Coverdell ESAs allow tax-free growth, but have income and contribution limits.
• UGMA/UTMA accounts offer flexibility, but no tax breaks and transfer control to the child at adulthood.
• Paying off personal debt and building an emergency fund first can strengthen your overall financial foundation before saving for college.
When to Start Saving for Your Kids’ College Tuition
Generally speaking, the sooner you can start saving for your kids’ college fund or overall education, the better. Tuition, even at in-state public schools (which tend to be the least-expensive options for many people) are already in the four and five-figures territory, depending on where you live. And, as noted, it’s unlikely that costs are going to decrease in any meaningful way in the near future.
For parents who paid for college using student loans, emphasizing saving for their children’s college expenses may be a no-brainer. Those parents may benefit from looking through a student loan refinancing guide, too, to see if they can free up space in their budget to increase their capacity for saving – more on that in a minute.
Yes, there are schools that offer free tuition, but it’s probably best to plan on paying for attendance – you never know what could happen going forward.
With that in mind, it’s never too early to start socking away money for your children’s education. Getting a head start gives your money more time to grow over the long term and to rebound after any dips.
It also means you can recalibrate if your child seems to be on track for scholarships related to sports or academic achievements, or if your child decides to forgo college. Keep in mind that the money you save will generally affect the financial aid package your child qualifies for.
Before you launch a college savings plan for your kids, it’s best to have your other financial ducks in a row. You might first focus on paying off any credit card balances or other high-interest debt. Then you might want to make sure you’ve paid off your own student loans (or looked at student loan refinancing, at least) and saved an emergency fund (generally three to six months’ worth of living expenses), and are on track in terms of saving for retirement.
After all, your child always has the option to take out student loans, but you can’t rely on that to pay for a crisis or retirement. You wouldn’t want to have saved for your kids’ college only to burden them with your living expenses after you retire because you haven’t built a nest egg.
Again, if you’re still grappling with your own student loan debts, you can experiment with a student loan refinance calculator to see if refinancing can make it easier to pay it off, and put you in a better position to start saving for your child’s education.
The Best Ways to Save for Child’s College
If you’re ready to start saving for higher education, you may be tempted to keep that cash reserve in a savings account. While it might seem like that would protect your funds from market ups and downs, you might actually be losing money.
That’s because even accounts with the best interest rates aren’t keeping up with the pace of inflation. Especially if your child won’t be going to college for a while, investing your savings is a way you might see your money grow. Keep in mind that investments can lose money.
It’s also worth mentioning, again, that many parents may still be struggling with their own student loan debts. As such, it’s worth asking: should you refinance your student loans? It’s worth considering, at the very least, or speaking with a financial professional about if you think it may help you save for your child’s college expenses.
Here are some of the best ways to save for a child’s college:
529 Plans
A 529 plan, also known as a “qualified tuition plan,” allows you to save for education costs while taking advantage of tax benefits (the plan is named after the section of the Internal Revenue Code that governs it). 529 plans break down into two categories: educational savings plans and prepaid tuition plans.
Educational savings plans, which are sponsored by states, allow you to open an investment account for your child, who can use the money for tuition, fees, room and board, and other qualifying expenses at any college or university. You can also use up to $10,000 a year to pay for schooling costs before college.
You can invest the money in a variety of assets, including mutual funds or target-date funds based on when you expect your child to go to college. The specific tax benefit depends on your state and plan. Generally, you contribute after-tax money, your earnings grow tax-free, and you can withdraw the money for qualified expenses without paying taxes or penalties. If you withdraw money for anything else, you’ll pay a 10% tax penalty on earnings.
Not all states offer tax benefits, so be sure to look into this when choosing your plan.
💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.
Prepaid tuition plans, as you may expect, allow you to prepay tuition and fees at a college at current prices. These plans are only available at certain universities, usually public institutions, and often require you to live in the same state. A prepaid tuition plan can save you a lot of money, given how much college costs are increasing each year.
Depending on the state and the 529 plan, you may be able to deduct contributions from state income tax. However, if your prepaid tuition plan isn’t guaranteed by the state, you might lose money if the institution runs into financial trouble. You also run the risk that your child will choose to go to a school that’s outside the area covered by the plan.
Coverdell Education Savings Account
Like a 529 educational savings plan, a Coverdell ESA allows you to set up a savings account for someone under age 18 to pay for qualified education expenses. The money can be invested in a variety of stocks, bonds, or other assets, and grows tax-free.
Your contributions are not tax-deductible, and the plan is only available to people who earn under a certain income threshold.
When your child withdraws the funds for qualified educational expenses, they won’t pay taxes on it. The money can also pay for elementary or secondary education. But note that you can only contribute $2,000 per year to a Coverdell ESA per beneficiary.
UGMA and UTMA Accounts
You can open a Uniform Gifts to Minors Act or Uniform Transfers to Minors Act account on behalf of a beneficiary under 18, and all the assets in it will transfer to the minor when he or she becomes an adult (at age 18 to 25, depending on the state).
Young adults are able to use the funds for anything they want. That means they won’t be limited to qualified education expenses. Another plus is that you can contribute as much as you want. The downside is that there are no tax benefits when contributions are made. Earnings are taxable.
A custodial account is an irrevocable gift to the minor named as the beneficiary, who receives legal control of the account at the age of majority.
The Takeaway
Given the increasing costs of higher education, parents are smart to save for a child’s college early and often. But rather than keep the money in a savings account, they’d likely benefit by choosing an option that lets their money grow.
The more popular routes for doing so often involve 529 Plans, Coverdell Education Savings Accounts, and UGMA and UTMA accounts. But you’ll need to do some thinking and research before deciding on the right strategy and accounts for you and your child. Just remember: The sooner you start saving, the better — generally speaking.
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With an abundance of Americans reaching retirement age—10,000 people will turn 65 every day for the next two decades—some of those will be looking for a new place to call home and a way to finance it.
You might think of the young and middle-aged as typical homebuyers and older people as more likely to have paid off, or nearly paid off, their homes and wanting to stay put. But with opportunity in the air and a desire to downsize—and sometimes upsize—more retirees could well be in the market for a new home.
Lenders and Age: No Legal Gray Area
Mortgage lenders look for a variety of things when qualifying a home loan applicant. What they can’t do is take age into consideration when making a lending decision.
The Equal Credit Opportunity Act bans creditors from using age to influence a loan application decision.
Retirees applying for a home loan, like people still working, generally just need to have good credit, minimal debt, and enough ongoing income to repay the mortgage.
• Proof of income
• Low debt-to-income ratio
• Decent credit profile
• Down payment
• If it’s a primary or secondary home
Let’s take a look at each.
Proof of Income
While many retirees live on a fixed income, putting multiple sources of income together can help establish income that is “stable, predictable, and likely to continue,” as Fannie Mae instructs lenders to look for.
Social Security. The average monthly Social Security payout was $1,827 in 2023, enough to contribute to a mortgage payment. But if Social Security is an applicant’s only source of income, they may have trouble qualifying for a certain loan amount.
Investment income. Sixty-nine percent of older adults receive income from financial assets, according to the Pension Rights Center. But half of those receive less than $1,754 a year, the center says.
But for those who do receive investment income, it’s important to know that a lender generally looks at dividends and interest, based on the principal in the investment. If an applicant plans to use some of the principal for a down payment or closing costs, the lender will make calculations based on the future amount.
Lenders may view distributions from 401(k)s, IRAs, or Keogh retirement accounts as having an expiration date, as they involve depletion of an asset.
Home loan applicants who receive income from such sources must document that it is expected to continue for at least three years beyond their mortgage application.
And lenders may only use 70% of the value of those accounts to determine how many distributions remain.
Annuity income can be used to qualify, as well, as long as the annuity will continue for several years (three years is likely the minimum).
Part-time work. Retirees who earn money driving for a ride-share service, teaching, manning the pro shop, and so forth add income to the pot that a lender will parse.
Clearly, the more income a retiree can note on a mortgage application, the better the odds of a green light.
💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.
Debt
If your income level falls into a gray area, mortgage lenders are even more likely to focus on your debt-to-income ratio.
Debt-to-income is a straightforward proposition. It’s calculated as a percentage and it’s vetted by lenders and creditors as a percentage. Simply divide your regular monthly expenses by your total monthly gross income to get your debt-to-income ratio.
Let’s say you have $5,000 in regular monthly gross income and your regular monthly debt amount is $1,000. In that scenario, your debt-to-income ratio is 20% (i.e., $1,000 is 20% of $5,000.)
By and large, the higher your DTI ratio, the higher the risk of being turned down for a mortgage loan.
If you have a spouse who also has regular income and low debt, adding that person to the mortgage application could help gain loan approval. Then again, married couples applying for a loan may want to consider how a spouse’s death would affect their ability to keep paying the mortgage.
Lenders, though, cannot address that matter in the loan application.
Mortgage lenders also give great weight to consumer credit scores when evaluating a home loan application. That’s understandable, as a high FICO® credit score—740 or above is considered generally quite mortgage-worthy—shows lenders that you pay your bills on time and that you’re not a big credit risk.
It might be smart to take some time before you apply for a mortgage to review your credit report, making sure all household bills are up-to-date and no errors exist that might trip you up. And it’s a good idea to limit credit inquiries on big-ticket items.
You can get a free copy of your credit scores at annualcreditreport.com and at any of the “big three” credit reporting agencies: Experian, Equifax, and Transunion.
The Property
Mortgage lenders will also take a close look at the home you wish to purchase.
In general, it’s easier to obtain a mortgage for a primary residence, as it represents the home you’ll live in long term and there’s only one mortgage to pay.
A second home, either as a vacation or investment property, is a riskier proposition, as it represents another mortgage to pay and may bring more debt to the lender’s mortgage approval score sheet.
💡 Quick Tip: Because a cash-out refi is a refinance, you’ll be dealing with one loan payment per month. Other ways of leveraging home equity (such as a home equity loan) require a second mortgage.
Down Payment
Using the asset depletion method, a lender will subtract your expected down payment from the total value of your financial assets, take 70% of the remainder (if it’s a retirement account), and divide that by 360 months.
Then the lender will add income from Social Security, any annuity or pension, and part-time work in making a decision.
For borrowers, putting at least 20% down sweetens the chances of being approved for a mortgage at a decent interest rate.
As a retiree, if your income, debt-to-income ratio, and credit score are solid, you’re as likely as any other borrower to gain approval for a new home loan. Lenders cannot legally take age into consideration when making their decisions.
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Debt isn’t always due to having made financial missteps. The most cautious, savvy savers among us can see their plans quickly undone by unexpected costs. Medical debt is among the most unexpected and urgent costs anyone can have. The question of how to pay for medical bills can cause enormous stress when there’s no money in the bank to pay hospital and doctor expenses, up front or later on.
There’s no question that medical bills can go from tedious to terrifying fast. Fortunately, if you feel unable to afford medical bills, there are strategies to find relief.
Make Sure the Charges Are Accurate
If you haven’t already, go through each bill line by line to make sure you received the services and medications listed. Mistakes happen — providers can make billing and coding errors, and insurers sometimes deny coverage — so don’t just accept what you see.
It’s important to be prepared to make some phone calls, maybe even write some letters, if you can’t get answers or satisfaction. Yes, your insurance company and service provider should be figuring out all of this for you, but if they don’t, it will be up to you to do so.
You’ll probably find yourself talking to a different person every time, so making a note of each person’s name and the date and time that you spoke will help make your records more complete. Ask for a supervisor if you aren’t getting the help you need.
Don’t Ignore Your Bills
You may have run out of ideas when thinking about how to pay medical bills you can’t afford. But pushing those medical statements into a drawer so you don’t have to look at them is not the answer.
If the billing statements have started to accumulate — or worse, a collection agency is calling — it can be tempting to ignore the situation altogether. But those paths of least resistance can lead to negative consequences.
If your debt goes to collection, that record can stay on your credit report for up to seven years. And to recoup what is owed, the owners of the debt may opt to sue you. If they win their court case, they could garnish your wages or place a lien on your property.
Don’t Use Credit Cards to Pay Off Your Bills
So what to do if you can’t afford medical bills? Even if you’ve decreased your medical debt through negotiation or by having billing mistakes removed, you’ll have to pay the portion of the remaining balance you’re responsible for.
If you have enough available credit on a credit card, that’s one way to pay a medical bill — but unless it’s a very low-interest card, it probably isn’t an ideal option.
• Interest will accrue each month until the balance is paid in full, which will increase the total amount paid.
• If you miss a payment or make a late payment, your next billing statement will include a late-payment fee and accrued interest.
• And if your payment becomes 60 days past due, your interest rate may go up.
Medical Credit Cards
Some providers might offer a medical credit card as a way to manage your payments. That’s not the same thing as a payment plan, so be cautious before signing on. The card may come with a no-interest promotional rate that allows you to make payments without interest for a designated period of time, but you’ll likely be required to pay the full balance by the end of the promotional period or you’ll be charged interest retroactively.
That’s because the interest is typically deferred, not waived, on medical credit cards. And even if you’re just a wee bit short of making full payment, the penalty could be significant.
Balance Transfer Credit Cards
Financial institutions tend to make balance transfer credit cards sound like the answer to every financial problem, but keep in mind that if you can’t pay off the balance within the designated introductory period, your account will revert to the annual percentage rate (APR) you agreed to when you signed up.
Ask Your Provider or Hospital for a Discount
If the costs are, indeed, all yours to pay and you just don’t have the money, you still may be able to get some help.
Nonprofit hospitals are required by federal law to have a written financial assistance policy for low-income patients. The law does not require a specific discount, nor does it specify eligibility criteria, but nonprofit hospitals are required to offer such financial assistance and make their patients aware of it.
Some states also require nonprofit hospitals to offer free or discounted medical services to patients with certain income levels.
With nonprofit or for-profit hospitals, you may be able to work out a payment plan, which, for medical debt, is often interest free. If you’re able to pay the bill, just not all at once, this could be an option to consider.
Negotiate
Negotiating medical bills is possible and often successful. Be prepared to meet with someone in the provider’s financial or billing department. When you’re worried about how to pay off hospital bills, making an appointment to meet someone in person can be a smart move — this is someone who might have the authority to reduce at least some of your balance, and they might offer other options for how to pay medical bills you can’t afford.
You may have to show paperwork proving your current income (a tax return or paycheck) and you should come with an amount in mind that you’re comfortable paying either in a lump sum or over time.
Finding Additional Help Paying for a Medical Bill
Government Benefits
Medicaid and the Children’s Health Insurance Program (CHIP) help to insure families who can’t afford health insurance or can’t get it through their employer. Both programs are joint federal/state programs, but may be called by different names in different states. To apply, you’ll need to provide accurate information about your income and any government benefits you already receive.
Recently, several government agencies jointly issued a rule banning surprise billing and balance billing. This ban, which already applied to Medicare and Medicaid billing, is being extended to employer-sponsored and commercial insurance plans.
• Surprise billing happens when a patient is seen by a provider who, unknown to the patient, is not in their insurance network of covered providers and bills for their services at an out-of-network rate.
• Balance billing is when a provider bills the patient for the remainder of a medical bill after the patient and the patient’s insurance company has paid their respective portions.
State Sponsored Programs
Each state has a program to help with medical bills and costs. Search by state on the State Health Insurance Assistant Programs site for details. Some states do offer programs other than Medicaid or CHIP, but it might take some research to find the right fit for your situation.
Private Assistance Programs
Some nonprofit financial assistance programs help pay certain medical expenses for specific conditions, such as cancer, leukemia, and others. There are also organizations that provide financial assistance with general medical costs like copays, deductibles, or prescriptions.
Medical Loan
Another solution for how to pay for medical bills may be an unsecured personal loan, which might have a lower interest rate (depending on the rate you’re approved for) and more flexible repayment terms than a credit card.
One advantage of a personal loan for medical expenses is that it might give you some leverage when you’re trying to negotiate a medical bill. You may be able to negotiate a discount for a lump-sum payment rather than stretching out the payment over time.
Some disadvantages of using an unsecured personal loan to pay medical bills are you’ll still have to pay interest on the loan, and loan approval may be difficult if you have poor credit.
The Takeaway
Taking a step back and looking at all your options is the best way to get started figuring out how to pay medical bills you can’t afford. You can often deal with these sometimes unexpected costs by using multiple methods and resources: checking your bill for accuracy, negotiating the balance due, and seeking out financial assistance if you can’t afford to pay what is owed.
If a personal loan is an option you choose, consider a SoFi Personal Loan. An unsecured personal loan from SoFi has competitive, fixed rates and a variety of terms. The loan application can be completed online, and you can find your rate in just a few minutes.
Check out SoFi Personal Loans to help pay for medical debt
FAQ
How long do I have to pay a medical bill?
Typically, doctors, hospitals, and other healthcare providers give a billing statement with a due date, often within 30 days. However, payment terms can vary, depending on insurance coverage, individual agreements, and local regulations.
If you’re unable to pay the bill in full by the due date, it’s a good idea to contact the healthcare provider or billing department to discuss possible payment arrangements or ask about financial assistance programs that may be available.
What is the minimum monthly payment on medical bills?
The minimum monthly payment depends on the provider and agreed terms. Some providers allow payments based on affordability, while others set a fixed amount or percentage of the total balance.
What happens if you don’t pay your medical bills?
Initially, the healthcare provider may send reminders or contact you to request payment. Late fees or interest charges may be applied to the outstanding balance. If the bill remains unpaid for an extended period, the healthcare provider may transfer the account to a collection agency. The collection agency will then pursue the debt, which can include phone calls, letters, and reporting the delinquent debt to credit bureaus.
Do medical bills affect your credit score?
Unpaid medical bills can potentially impact your credit, but not right away. Health care providers typically don’t report to credit bureaus, so your debt would have to be sold to a collection agency before it appears on your credit report. Generally, this doesn’t happen unless your bill is 60, 90, or 120+ days past due.
Even after your bill goes to collections, the consumer credit bureaus give you a full year to resolve your medical debt before the collection account is added to your credit history. And, if the unpaid bill is under $500, they won’t add the account to your credit report and it won’t impact your score.
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