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Do student loans have you down?

By Kemberley Washington · Bankrate.com
Friday, November 9, 2012
Posted: 10 am ET

A college friend recently informed me his student loans were in default. When I asked why, he said, "Just the mere thought of my student loans gets me down, so I simply decide to ignore them."

With more Americans graduating with student loans, it is important to understand repayment options. Unlike your car loan or mortgage, you can request temporary relief or a reduction in payments on student loans if you fall on hard times. And if you work in certain sectors, your student loans may be eligible for cancellation.

Get temporary relief

If you owe money on student loans and are not in a position to repay them, you can request a deferment or forbearance. A deferment provides temporary payment relief. On certain loans, you may not have to pay interest. A deferment is granted to individuals who are enrolled in school at least half time, who are unemployed, or who are in a handful of other circumstances.

If you are unable to obtain a deferment, you may want to consider forbearance. Forbearance is granted to individuals who are experiencing an economic hardship, medical issues or other qualifying factors. It allows you to stop making payments or reduce your payment for up to 12 months. Interest continues to accrue on the loan.

You can find more information at this Web page from the U.S. Department of Education.

Make them go away

Don't you wish your debt could vanish? That may be possible if you work in certain sectors. If you are employed in certain public service positions or are a full-time teacher in a low-income area, your student loans may be canceled in whole or in part. And I know this may not be of much comfort, but your student loans also could be discharged if you become disabled or die.

Reduce your payments

Consolidation of student loans can also help reduce monthly payments. This may be a great tool if you have various loans from different providers. However, be careful. Although it reduces payments, you are ultimately paying more interest in the long run, since you are essentially refinancing your loans over a longer period.

For more information, visit the Direct Loans Consolidation website.

As much as I love my education, I am not particularly thrilled about my student loans. Yes, the loans have provided me a gateway to obtain my education, but the debt also sits on the liability side of my balance sheet. If you were like me and had to obtain student loans to pay for your education, understanding your payment options and ways to reduce your debt burden will help you create a better financial future.

Remember: your choice, your future!

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12 Comments
Jim
November 11, 2012 at 5:58 pm

What Cate said is correct !! I took out the student loans, I am now permanently disabled from trying to prevent a special needs kid from seriously hurting himself. I got seriously hurt by the surgeon trying to repair my hernia injury and now I'm the one who's stuck using a cane for the rest of my life with no job and chronic pain. Taxes on my $800 a month disability check are being garnished from my wife's minimum wage job!! How are we supposed to live?? Thanks a lot Fed government.

Cindy
November 11, 2012 at 2:05 pm

About 3 1/2 years ago, I decided to go back to graduate school while I was unemployed. After earning my Masters, my annual income is equivalent to that of someone with a Bachelor's or no degree at all. My monthly loans payments are over $900.00. Furthermore, I've worked hard to maintain my credit history only to find that I can't attain additional credit or refinance my home because my credit score is negatively affected by student loan debt owed. I've never defaulted, most of the time I utilize the temporary harship option, which accrues an overwhelming stacking of interest. Today, I regret the idea of earning a Masters degree. The thought of opening a student loan statement makes me cringe. Our federal government has to know how student loans vs. credit reporting is limiting purchasing power. How does this effect the economy?

Cate
November 11, 2012 at 1:57 pm

Qualifying for "disability" means that you must be in a coma.If you are on Social Security Disabilty they will garnish your disability check. They will take any and all tax returns. They do not account for you income in any way if you are in default. A mother of one, disabled by illness, was told there is no agreement to be made until she paid the $3,000. arrearage. Once that was paid she could negotiate lower payments. Her total income.....$467.00.People get caught in the catch 22 because of the ruthless treatment they get from "customer service". My advice to any and all........work, save your money,apply for scholarships and Grants and DON'T EVER take out student loans.
You cannot predict your ability to repay once you graduate.

Steve
November 11, 2012 at 1:22 pm

Problem with IBR it doesn't factor in other private loans you may have. It is almost laughable what they're asking me to pay. I have my loans from law school and am lucky I make a nice salary, but due to student loans I feel as if I'd be better off not going to law school and making a lot less $.

Something needs to be changed with private loans.

Jane Doe
November 11, 2012 at 12:43 pm

Works well if you don't have PRIVATE student loans.

Mike
November 11, 2012 at 10:26 am

Private student loans is what is hurting us the most. They need to be dischargable in bankruptcy. The democrats are trying to make this possible, but it is being stalled by the GOP.

ben
November 11, 2012 at 3:32 am

IBR is also based on total household income even if you are married. That is not fair since your spouse (like mine) has no legal attachment to my loans. Therefore the payment is based on our combined income not just mine.

IBR All The Way
November 10, 2012 at 11:33 pm

I was just thinking why IBR (Income Based Repayment) wasn't mentioned- it IS the best way to go, especially if you find yourself in a low paying job while looking for a newer one or find yourself unemployed. Its based on a of your income (which makes sense) not some outrageous monthly payment plan they decide on.

michelle
November 10, 2012 at 8:53 am

I agree with the previous comment about the Income Based Repayment option. I am currently enrolled and it has been a life saver since I was experiencing unemployment. A person does not have to default on a loan if you qualify for this repayment.

haha
November 10, 2012 at 2:19 am

Income Based Repayment is the best way to go above all the options listed above, if you qualify of course. When you use deferement and forbearance, at the end the unpaid interest capitalizes and causes you to have higher payments. IBR sets a ceiling payment upon intialing applying. The ceiling payment is a standard payemnt under a ten year payment plan calculated on your balance the day of your intial approval. Usually if you qualify for deferment due to unemployment or economic hardship, you will qualify for a $0 IBR payment. So if you're not paying on your loan, at least $0 IBR payments are leading to eventual a loan discharge at year 25, which deferements don't on their own. IBR payments, even if they're $0 are also "qualifying" payments for the Public Service Loan Forgiveness Program