Student loan debt is becoming one of the fastest growing sources of debt among young adults today. The struggling economy has yet to provide the influx of entry-level positions graduates were promised in exchange for getting their education. With few employment options and overwhelming student loan debt, many graduates have been forced to seek debt relief solutions such as bankruptcy.
Although bankruptcy can be a great tool for debt relief in the traditional sense, it does not usually provide the opportunity to eliminate this type of debt in the process. Student loan debt is one of the most challenging debts to have discharged in bankruptcy, but that does not mean that there are no other option available for debt relief.
Loan Deferment Program
One of the easiest ways to provide temporary relief from student loan payments is to request a deferment. A student loan deferment temporarily suspends payments for a period of 6 to 12 months. In most cases, the interest associated with the loan is also suspended during the deferment period.
Qualifying for a loan deferment is as easy as contacting the lender to request the deferment. Deferments are available for financial hardships, involuntary unemployment, returning to school or starting your own business. The most important aspect of qualifying for a deferment is that you are not delinquent on your payments. Therefore, you must contact your lender to request the deferment as soon as you become concerned you may miss a payment.
Loan Forbearance Program
Similar to a loan deferment program, a loan forbearance program can also suspend your payments for a period of time. A forbearance program is typically reserved for those who have defaulted on their payments and can prove financial hardship. Although a forbearance does suspend payments for up to one year, the interest on the loan will continue to accumulate during the forbearance period.
Qualifying for a loan forbearance can be easier than a deferment as the benefits are not as great. A forbearance program can grant payment suspension for medical problems, unforeseen personal or family problems and lack of income sufficient to cover the monthly payment, which is 20% of the borrowers total monthly expenses. Since defaulting on your loan does not hinder acceptance into a forbearance program, you simply need to contact your lender to request the necessary application for the program.
Loan Consolidation Program
Repaying your debts is always the best solution in order to protect your financial future. However, there are times when you can afford to make monthly payments on the loan but not over an extended period of time. Obtaining a debt settlement or consolidation plan can be a better option to bankruptcy, in that your credit will be better off having repaid the debt rather than have it eliminated. A loan consolidation can provide you with a reduced principal amount of debt owed. In other words, you may be able to negotiate a debt settlement with your lender and repay only this amount in full before your debts are considered satisfied. It is a good idea to attempt to negotiate with your lender directly rather than use a third party debt consolidation company.
According to a recent report issued by Edvisors.com, students that are part of the graduating class of 2015 will be saddled with an average of $35,000 in student loan debt. While $2,000 higher than the average debt last year, these numbers no longer shock a nation used to seeing the total student loan debt in the U.S. surpassing $1.3 trillion.
Not only is this amount of debt bad news for graduates that will likely only find entry-level jobs, but it’s also causing many high school students to second-guess if college is really worth the financial struggle at all? For those that have already graduated, the burden of debt is real and a huge strain.
Debt can get in the way of moving forward with the things in life that many people dream of, like; buying a home, saving for retirement, sending their own children to college and much more. Debt can even prevent a person from marrying, and even choosing to have children – often, these things are pushed to “off” to a later time in life when debt isn’t so high… but how do you work to eliminate that debt for a “later time?”
The other downside to a large amount of student loan debt is the sheer emotional distress that comes with paying more money than you can earn each month, or dealing with debt collectors that are less than understanding to put it mildly. Is there any end to the burden that college and student loan debt places on new graduates?
Between a Rock & a Hard Place… Together!
If you are facing student loan debt, you are not alone. In the U.S. 40 million Americans have some kind of student loan debt. This type of debt is higher than credit card debt and car loan debt combined – second only to mortgage debt. With fairly new laws that make student loans exempt from bankruptcy it can seem like there’s no way out. This debt can, in fact, be suffocating.
The good news is… there are ways to deal with student loan debt, no matter how much you owe, or how long you’ve owed that amount. The best way to figure out a strategy that will get you out of student loan debt is to speak with a qualified lawyer that works with students struggling to pay off debt. It can be impossible to negotiate with student loan companies (both private and federal) on your own, since these companies often have the upper hand. But help is available and getting out of debt is possible!!
It’s easy to default on a student loan. If you miss one payment, or simply forget to pay, your loan will go into default. Once that happens, the loan can be passed from collection agency to collection agency resulting in endless phone calls. Some agencies will even go so far as to contact family members with the excuse that they are trying to reach you – largely a psychological game. You should know, though, that you still have rights, even when it comes to a defaulted loan.
Some of the things that you should know about collection agencies attempting to collect a student loan debt include:
It is illegal for a company to leave details about your loan on a public answering machine.
A company cannot discuss your loans with anyone that is not a co-signer.
Companies cannot garnish your wages without a court order.
In most states, there is a statute of limitation on the life of a loan.
Remember, collection agencies must still follow the Federal Fair Debt Collection Practices Act ( FDCPA ). Each state is different, and each loan is unique, but help is available.
So you want to manage your student loans and perhaps even get rid of credit card debt for good, right? Learning to structure and organize your finances before you start to earn your degree never comes easy for anyone, and is often not taught by the people in our lives. More times than not our parents are too busy with their own lives and might feel they will stress you out more by playing with the numbers of budgeting to show you just what you are up against in advance. So once you have graduated you should already have a general idea by doing some basic inventory of your finances and perhaps check out what you may foresee for the coming 6-12 months in college.
We are hearing in the news that university education is about to get much more expensive, means that it is more important than ever before that students and graduates get their finances straight and are more proactive when it comes to money matters. Managing your finances as such an exciting, and expensive, time can be difficult, so we’ve put together some useful tips to help you on how you get in less debt and have a better chance of getting out of it once you finish in education.
Everyone should be keeping a close watch on overdrawn accounts at the lowest possible interest, make sure you know how much is in each account and make a record of any old direct debits or payments. To make some positive changes for the future of our finances we need to take a hard look at ourselves to see if we were careless with old statements and bank letters, usually in a big mixed up box where there is no chance of ever finding the document you’re after. Try to get out of the habit of doing this and use a filing cabinet or organizer to sort any documents by account, meaning it’s easier to find something should you need to check an overdraft limit, account number or any other information provided by the bank. Every 6 months go through your documents and get rid of anything you no longer require.
So we should always work at budgeting our monthly income and then subtract the cost of your monthly essentials from it. Begin with your rent, utility bills and food. This will leave you with your disposable income, which you should then divide into weekly amounts and at the beginning of each week take out in cash. Having the cash in your wallet rather than using your card means you always know how much is left for the week, making you less likely to overspend.
When debt worries creep up on you, it can be tempting to ignore them and carry on with the more enjoyable things in life- like the student union bar- but it’s really important that you remain aware of your finances and avoid diversion tactics such as writing out checks for amounts you know you don’t have or taking money out when you know a debit is about to put you up to your limit, as you will just end up in more debt because of charges.
Work at your studying, and work at learning to save your money and only borrow for the purpose of increasing your credit score, not to end up with high and out of control bills. There are plenty of part time jobs going, but make sure you use your time wisely and work more in Holidays and quiet times of the year. Working less during exams and deadlines to stay focused on your achievements.