2. Student loan debt defaults are at an all time
high and are only going higher. In 2010 the
default rate was at a staggering 7%, one year
later...8.%.
These astronomical default rates will only go
higher as the economy stagnates and people
struggle to make the payments. But still there
are others who are making the payments and
who are getting out of student loan debt.
3. Federal or Private?
Pay off your private student loans first. Interest
rates, even though low now, may rise in the
future. You also will not have the protections
offered you through federal student loan
programs. You must keep your federal student
loans current though.
Once You’ve paid off the private loans, consider
adding that payment amount to your federal
loans. This will not only pay the loans off sooner
but will save you money on interest.
4. Can’t make the payments?
If you are struggling to make the payments on
your student loans, consider having the loan
terms extended. This will lower your monthly
payment but bear in mind, you will probably
more than double the interest you will pay.
Also, before you default, keep in mind that there
are no statutes of limitations on federal student
loan debt. Also, there is no bankruptcy
protection. The creditor can and will continue to
collect the debt long after you have defaulted.
5. Income based repayment plans
There are three repayment plans that are
tied to your income: income-contingent,
income-sensitive and income-based. One
of these plans may be a viable option for
you if you are having trouble paying your
loans. Some of the plans may take your
payment down to $0.
6. Student loan forgiveness options
There are several ways to have your federal
student loans forgiven. If you are in one of the
income-based repayment plans and you meet
certain income stipulations, your debt may be
forgiven after 25 years if you stay current on
your payments.
Your debt may be forgiven in as little as 10
years if your are in one of the income-based
repayment plans work in certain public service
jobs, including teaching, health, military and
public safety jobs.
7. The military offers plans for student loan debt
forgiveness as well as certain high-need
occupations such as doctors and nurses.
Teachers may also have options for student loan
forgiveness.
Forbearance may be an option. This will allow
you to stop making payments for a specified
amount of time. The interest will continue to
accrue however. If you are in financial difficulty,
you can ask for a forbearance to buy you time to
get your financial situation under control.
8. Bankruptcy won’t help
You will not be able to have your federal student
loans forgiven through bankruptcy. Your only
options are to pay the loan (whether modified,
forgiven, or with regular payments) and default.
It is not recommended you default on your
student loan debt.
In summary, the best option is to own up to the
fact that you owe the debt and make every
effort to make the payments. If you find you
can’t, contact the student loan guarantor
immediately