Millions of Americans are feeling the burden of student loans. Many college graduates will find employment immediately after graduation, while others will go months, even years trying to find a job based on their undergraduate degree. Other students will be forced to accept employment that is unrelated to their college degree. You also have those that will join other minimum wage employees, working in fast food and retail. Whatever the case may be these student loans aren’t going to magically disappear, leaving the loan burden on the borrower.
The Federal Reserve Bank of New York released a report just this week. The report shows that outstanding loans will top $1 trillion by the end of the physical year. Many universities are seeing a decline in enrollment, forcing officials to make the decision to close down dorms, lay off employees, and increase tuition. This decision could be the determining factor of whether or not young people will enroll in a university in the upcoming years.
The percentage of borrowers that defaulted on their student debt increased from 6.7 percent in 2007 to 8.8 percent in 2009. In 2015, student loans totaled more than $100 billion, which is actually a world record.
Student Loan Debt Solution
If you are drowning in student loan debt, you are not alone. However, it is important to address the issue before it gets out of control. Keeping your loan is good standing, even if your financial budget is tight is not an option. The first thing you should do is to schedule a meeting with your loan servicer, so the issue can be addressed before the payment is due. Your issue may be minor and solved bust by altering the payment due date. Other options include:
- Consolidation – Multiple student loans can be combined into one loan. This will leave you with one monthly payment, instead of multiple monthly payments.
- Repayment Plan – Your monthly payment will depend on the type of loan you chose and when you borrowed. If you are looking for lower monthly payments, you should consider changing your repayment plan.
Income-Driven Repayment Plan
Once you reach the point that you can no long afford to make the monthly payment, you may want to consider the income-driven repayment plan. Those eligible to participate in this type of repayment plan can potentially reduce their monthly payment. The payment is based on the individual’s annual income and family size. There are actually four of these plans that are offered by the Federal Student Aid, an Office of the U.S. Department of Education.
- Pay as you Earn
- Revised Pay As You Earn
To learn more about these repayment plans, be sure to visit the Office of the U.S. Department of Education website. Here, you will also find an online application and more information about the eligibility process.
Postpone Payments (Deferment)
As you are striving to keep your loans in good standing, you may be faced with an emergency situation. Your vehicle may need repairs, an immediate death in the family, or an unexpected payment may appear out of nowhere. These issues and tragedies may alter your ability to make your monthly student loan payment. If you find yourself in this type of situation, you should immediately contact your loan servicer. You may be eligible for a deferment, which means that you can skip the loan payment and only pay the interest on the loan. However, in some cases the federal government will pay the interest on the loan for you.
If you are facing financial hardship or illness, you may be eligible for discretionary forbearance. Your lender will decide whether or not to grant you forbearance. With mandatory forbearance, you will be granted forbearance, if you meet the eligibility criteria.
If you are granted forbearance, the interest will accrue. You can pay the interest during this time, if you do not want the amount to increase in the future. Forbearance will grant you permission to stop making payments or reduce the monthly payment for up to 12 months.
If you have difficulty finding employment after graduation and do not want to default on your student loans, you may be eligible for loan forgiveness. A portion or the entire amount of the loan may be forgiven, but only if you are willing to exchange your services for the amount of the loan.
There is also the possibility of a loan discharge, but this is only based on rare incidences such as your becoming permanently disabled. In this case, you will be no longer be obligated to make the loan payments. If you are denied a loan discharge, you cannot appeal, since the decision is final.