If you are among the 3.3 million Americans with defaulted student loans, do not lose hope. Certainly, the frequent phone calls by your creditor, the knocking at your door, wage garnishment, legal action and similar situations can be intimidating and can cause you a lot of stress.
Student Loan Debt Relief
But you can do something about it. A settlement is possible. Here are the alternatives that you may want to consider when dealing with unpaid student loan debt:
- Reduction, repayment and forgiveness. You might be eligible for a certain payment plan or a student loan forgiveness scheme depending on your particular financial situation and the kinds of student loan that you have.
If you have student loans from the federal government, the following programs may be available to you:
- Income-driven repayment plans. This scheme allows you to make monthly payments based on the income that you earn. This will make it easier for you because you will not be subject to an amount that is beyond your ability to pay.
- Deferment and forbearance. This plan allows you to postpone your payments until you have the capacity to make your payments. The disadvantage of this option though is that your total amount owed may increase due to the interest charges.
- Loan reduction. The following payment options are available through collection agencies via the US Department of Education:
- You can pay the principal plus the accrued interest, with any future collection surcharges and fees waived.
- You can pay the principal plus half of the total interest, with 50% of the interest forgiven.
- You can pay 90% of the total balance of your loan principal and accrued interest. That means the total amount due is 10% discounted.
In any of these options, you are expected to pay your student loan debt in one lump sum payment, which is often set 90 days after the settlement agreement date.
Hence, you need to be prepared. You need to have sufficient cash available to liquidate your debt within such time. Even if this amount is reduced and certain fees are waived, this will still involve a large sum of money.
There are instances though that the Department of Education allows monthly installments but you still have to complete your payments within one fiscal year.
- Loan forgiveness or loan discharge. This scheme is available in very limited cases. This can be availed of by a selected group of workers like federal agency employees, public service workers, doctors, medical professionals working in the military, lawyers under the program of the Department of Justice, nurses and qualified teachers. Student loan discharge is also recently available to people with total and permanent disability. Further, this option may be available to you in cases where your school closes or committed fraud.
For federal loans, applying for loan reduction, repayment and forgiveness is free. You may try to visit the website of the Department of Education student aid or you may contact your federal student loan provider to get the details of these options.
Private student loan debt relief programs
- With private student loans, you have fewer options. To better explore your options, it is best to contact your loan servicer directly.
- Hiring the services of a student debt attorney. A lawyer can often help you navigate the confusing landscape of debt negotiations. The attorney can negotiate with your creditor. He or she can review and evaluate the terms of your debt settlement contract to make sure the provisions are legally binding, just and will work to your favor. The fees the attorney charges may still be worth the cost if the lawyer helps you secure a good settlement.
- Loan Consolidation. Consolidating your student loans means that you combine multiple loans into one loan. That is, you borrow and use the proceeds of your borrowing to pay off your several loans. You have to note though that loan consolidation is not an option for everyone. People typically enter into loan consolidation in order to simplify their monthly payments. Receiving multiple bills can be confusing. Consolidating several loans into one simplifies things. Also, this is a good option if your consolidation loan offers lower interest and lower, more affordable monthly installments, making it easier for you to make payments and avoid defaults. When considering this option, it is really important to thoroughly evaluate the payment plan in quantitative terms. Experts say whether consolidating helps you depends on factors such as the type of loans you have, their interest rates when you took them out and whether they came with benefits you would not want to lose. Experts further suggest that you should not combine federal student loans with private loans because, in the process, you might lose certain benefits and protections provided by your federal loans.
Student loan debt relief programs
There are alternatives to take care of your student loan debt available to you. Contact us today for a free consultation!
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