Understanding Your Repayment Options
Long, long ago, on a campus far, far away, you may have used student loans to pay not only for tuition and books, but also to fund your spring break travel, to buy a bicycle (or a car), to purchase consumer items, and more.
The ghouls, ghosts and goblins of Halloween may be fading quickly into autumn’s twilight, but the ghosts of student loans past seem always to be with us.
For several years, experts and policymakers have been warily watching student loan debt skyrocket, worried that it might be the next “bubble” in the U.S. economy. Regardless of the impact student loans have at the macro level, student loans haunt many American households on a personal level.
Far too many students take out the maximum student loans possible without considering their ability to repay those loans after graduation. The rule of thumb is to borrow no more in total than what the student realistically can expect to earn during his or her first year out of college. What this means, as an example, is that teaching majors should borrow far less than engineering majors.
Students who leave school without a degree are in particularly frightening circumstances. While they earn on average 7% more over their lifetime than someone with only a high school diploma, they still experience higher than average unemployment rates and, additionally, still have to repay thousands of dollars of student loans.
As many graduating students learn all too late, near-supernatural intervention is usually required to get rid of student loans in any way other than to pay them off. Even our bankruptcy system makes it very uncommon for student loans to be forgiven.
So what is a graduate with ghastly student loan debt to do? Below you’ll find several repayment options to consider*:
1. Bankruptcy: You might think about filing for bankruptcy in federal court on your debt if you can prove your current and future inability to make payments while maintaining a minimal lifestyle without undue hardship on you or your dependents (this is, admittedly, and oversimplification of the Brunner test).
2. Standard Repayment: Make standard payments to eliminate your debt in 10 years (usually the least amount of interest paid of these options)
3. Extended Repayment: Extend your repayment period to 20 or 25 years through your lender (this chillingly increases the amount of interest you’ll pay over all on your debt)
4. Income-based: Through your lender, sign up for one of several income-based repayment plans that require much smaller or, in some cases, no monthly payments (be aware that your payments may not even cover the amount of interest added to your loan each month, leading to increasing balances even after making payments)
5. Public Service Forgiveness: If you meet certain qualifications, such as working full-time for government-recognized nonprofit, educational, or healthcare organizations while making payments and you apply through Federal Student Aid for forgiveness of the balance after 120 on-time payments (10 years), you may have the balance of your debt forgiven.
Now that you understand your basic repayment options, you need to decide if you want to 1) do the leg work yourself by making phone calls, negotiating repayment options, and completing paperwork (most affordable), 2) work with a student loan counselor like those certified to do so at Debt Reduction Services, Inc., or 3) pick a student loan counselor from among the 80,000+ results offered by Google and hope you find one that is not a fraud.
At Debt Reduction Services, Inc. (toll-free 877-688-3328), the initial student loan counseling session is available at no charge and with no obligation.
Above all, do not lose hope. Student loan debt may be scary, and negotiating the right repayment plan can be terrifying, but in the end – whether or not you achieve it with the help of Debt Reduction Services – your own spirit will soar as you ride off into the sunset, free from debts incurred so many years ago.
*Not all student loans are created equal. Depending upon the type of loan, the date it was taken out, and other factors, it may not qualify for all of the options listed above.