On average, students are graduating college with more than $30,000 of debt translating into hefty payments often spanning a decade. Getting behind on federal student loan payments can lead to serious financial consequences so at the first sign of trouble, it’s important to act.
Borrowers should first contact their loan servicer to see what repayment plans exist. Typically borrowers are enrolled in the standard repayment plan when payments begin, but there are a few to choose from that might be a better fit financially.
For example, borrowers are eligible for a graduated repayment plan that starts with lower payments which gradually increase over the lifetime of the loan. Although, the overall cost of the loan may be more, it may make payments more affordable when a grad is first starting out to avoid defaulting on the loan. If at some point, a borrower is in a position to pay more, they may change the repayment plan which can save on interest.
If a borrower is temporarily out of work or decides to go back to school to acquire more skills or training to land a better job, they may be able to suspend payments altogether using forbearance or loan deferment options.
If qualified, deferment allows borrowers to defer loan payments for a period of 3 years or more and interest on some loans will not accrue during the deferment period, specifically federally subsidized and Perkins loans. If a borrower cannot qualify for deferment, they may be able to apply for forbearance to get over a rough patch for periods of 12 months at a time although interest will continue to accrue on all loans.
While some may be able to come up with a financial plan enabling them to resume regular student loan payments, others may struggle because they are also dealing with credit card, medical payments, and rent and a car payment on top of student loans. In cases where a borrower is stretched too thin, bankruptcy may be an option to discharge credit card or other unsecured debt so a borrower can tackle student loan payments and afford the necessary living expenses.
When you are having problems repaying student loan debt and looking for a fresh start, discuss your options with a experienced bankruptcy attorney who can help you decide if bankruptcy is a good strategy for your financial situation at 309-674-8125.