Paying Back Student Loans

Paying back student loans can be very difficult for families that do not have the earning capacity to do so. As of 2015, there is over 610 billion dollars of educational debt that is spread across the United States. PBS Frontline recently did a piece on education titled College, Inc. and stated that student loan debt is roughly equal to the nation’s credit card debt; thus, the government has been trying to tackle the student loan debt problem before it escalates into a crisis. It is also been stated by several news media organizations that roughly only about 40 percent of student loans out of that 60 plus billion dollars are being paid on time. The rest of the student loan debts are either behind in payments, default or in forbearance or deferment. Before giving up hope on paying back student loans, consider looking into alternatives to help ease your debt burdens.

According to USA Today, The average student carries at least $20,000 of education debt.

Understand that student loans are not treated like regular unsecured debts, such as credit cards. As of 2005, Student loan debt cannot ever be discharged in bankruptcy court and there is no statute of limitations for collectors to sue. That means that debt collectors can sit back until your are ready to retire and still collect! Collectors that are hired by lenders can levy bank accounts, place wage garnishments in you live in a state that allows them to do so, place liens against your property and even seize income tax refunds from the IRS. Why would the government allow such a thing you asked? Because with the rising costs of education, lenders would shy away from lending money if consumer protections were stronger; thus, individuals seeking a college education would have a hard time finding the funds to attend training. It is a flawed system indeed, but the matter is how you can ease the burden that you are now in.

In 2009, the government introduced the IBR, which stands for Income Based Repayment plan to help formal students pay back student loans. The process involves capping the payments of a percentage or yearly wage income. Some individuals that are below 150% of poverty guidelines will not have to make a single payment and the government will pay the interest for the first three years. To see if you qualify, contact the servicer of your federal education loans or contact the Department of Education for more information. The steps are to receive an application from your student loan servicer then either send a copy of last year’s tax return or fill out an IRS release form per the lender requirements with the application and then wait for a decision if you are accepted into the program.

Paying private student loans under plans are not generally available because they are not backed by the federal government. Private student loan lenders do not offer the flexibility that federal loans do in terms of payments. Interest is often much higher and is compounded monthly onto the principal that in turn causes the total balance to balloon. What can you do about it? The only thing that you can really do is do what ever it takes for paying back student loans that are private. Consider picking up a part time job and try to make double payments if you can to knock down the principal. When you put more money towards the monthly debt payment, include a letter with a separate check that the funds are to be applied to the principal. Check the following monthly statement to ensure that the lender followed through with your request.

Avoid forbearances if you can. When your student loans are in forbearance or deferment, some loans that are private or unsubsidized will capitalize the monthly interest onto the principal.

Look into programs that ease paying back student loans such as AmeriCorps and governmental service jobs that forgive student loans after a certain time period of services performed.