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!