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How To Deal With Student Debts

Updated on January 30, 2012

You’ve got the degree. Now what about the debt?

Millions of U.S.college graduates find themselves with new degrees, paid for with tens of thousands of dollars of student loans that have suddenly become due. They were not counting on a recession and elimination of jobs from theU.S.labor market when they took out the loans. Now they are stuck. So what can you do if you are saddled with student loan debt you cannot repay?

Outstanding student loan debt is expected to exceed over one trillion dollars by 2012, making it the latest economic bubble that threatens theU.S.economy. For that reason, there is increased political will to find solutions. That’s the good news.

The bad news is that, today, there is almost no way to escape the debt through bankruptcy or ignoring it. Thanks to the well-funded bank lobbyists, the 2005 Bankruptcy Reform Bill made student loan debt one of the few types of debt that is not dischargeable through bankruptcy. If you ignore the debt, the penalties and interest will continue to pile up. They can garnish your future wages, and even your social security! So you must face reality: this debt is going nowhere. Deal with it.

There are a couple of ways to help cope with the debts:

Paying The Loan
Paying The Loan | Source

1. Pay it off

If you have parents or grandparents willing to give you the money, start there. If you expect to inherit the money, you might talk to the person who is leaving you money about retirement planning options that would allow them to give you your inheritance in chunks.

Another option for new graduates is going overseas to teach English. If you live like a pauper, and work day and night, you can amass a small chunk of change to pay down the debt more quickly. The advantage of putting in two or three years overseas is that your wages are not taxed atU.S.rates.

2. Reduce the debt through loan forgiveness

If your loans are through the U.S. Department of Education, there are provisions for reducing loans if you agree to work in specific high-need fields such as teaching or providing medical services in disadvantaged or rural areas.

Try nonprofit organization such as Americorps, Peace Corps, or the Military. They can help you get a deferment on the loans (they might even pay some of it off). Do not bother trying to get the military to pay off student loans, with the current war being over and the downsizing of the army, they stop giving out the loan repayment program.

3. Adjust the debt to fit your income

If your loans are through the government, they understand the situation you are in and want to help. They offer a number of different payment options for low income people. If you have private bank loans, you have fewer options. Private bank can pretty much do whatever they want to you and you do not really have much of an options but to accept it. This is why you borrow as little loans from private bank as possible. This leads to your last option.

4. Change the system.

There is growing political pressure to change the disastrous banking laws that trapped students with debts that can never be repaid. Get actively involved with groups that seek to overturn these laws such as http://studentloanjustice.org/.

Whatever you do, do not just ignore the debts. You must become the change that you want to see in the world.

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