Are You Concerned about Student Loan Debt?
The student loan industry has undergone major changes and reform since 2009.
While private and federal student loans still exist, most borrowers currently have federal student loans through the US Department of Education.
One benefit of having federal student loans is that once you graduate from college, you generally have a six month grace period before beginning your re-payment.
The six month grace period is intended to give you a little time to get a job and get started on the right foot. It is also enough time to do what is called a Loan Consolidation and lump all of your student loans into a single, loan where the payments may be more manageable.
Student Loan Consolidation
A loan consolidation brings with it the flexibility or a range of repayment plans.
- Standard Repayment Plan-you pay a fixed amount over 10 years (up to 30 years for a consolidated loan)
- Graduated Repayment Plan-you pay a lower amount at first and your payments gradually increase over 10 years (up to 30 years for a consolidated loan)
- Extended Repayment Plan-your payments can be fixed or graduated with repayment time of up to 25 years.
- Income Based Repayment Plan (IBR)- your payments will be capped at 10-15% of your income depending on the loans you have and any remaining balance will be forgiven after 20-25 years depending on the types of loans you have. You are required to submit annual renewal documentation to determine your monthly payment for the year.
- Pay as you Earn Repayment Plan- your maximum monthly payments will be 10% of your income and any remaining balance will be forgiven after 20 years. You are required to submit annual renewal documentation to determine your monthly payment for the year.
- Revised Pay as you Earn Repayment Plan- your maximum monthly payments will be 10% of your income and any remaining balance will be forgiven after 20-25 years depending on your loans. You spouse's loans may be considered in the calculation whether you file a joint tax return or file separately. You are required to submit annual renewal documentation to determine your monthly payment for the year.
- Income Contingent Repayment Plan-your monthly payment will be the lesser of 20% of discretionary income or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income. Any remaining balance will be forgiven after 25 years. You are required to submit annual renewal documentation to determine your monthly payment for the year.
- Income Sensitive Repayment Plan-your monthly is based on your annual income and you pay up to 15 years and the amount you pay varies from lender to lender.
Student Debt Relief
If you feel overwhelmed by student debt, there is hope. First, let's lay some ground rules.
As borrower, you NEVER want to get to the point of being in default on a student loan. If you are in default, the lender has the ability to demand the full balance to be paid immediately, and that can cause massive damage to your credit score!
If you are unable to meet the demand for immediate payment, the lender can seek legal recourse. They have the ability to contact your employer and garnish your wages up to 15% each paycheck until the balance is paid. They also have the ability to seize any tax return you may have received.
In general, you can't declare bankruptcy with regard to a student loan. Some exceptions do apply, but for the most part it is very difficult to have a student loan discharged through bankruptcy.
The most important thing you can do as a student loan borrower is be proactive. Call your lender and discuss these options with them.
Whether it be a federal or private student loan, the lenders generally want to work with you to ensure they receive payment. Discuss the above mentioned repayment plans with them and determine which option is best for you.
Be aware that the eligibility in each program is determined by numerous facts specific to your personal portfolio. It is important to know your portfolio to determine your eligibility. Since the student loan overhaul began, the user friendliness of the student loan websites and the eligibility determination has become less of a burden on the borrower. That's good for you, if you know how things are changing and how those changes are of benefit to you.
Harold Shepley and Associates can Help
You aren't alone. If you need help with Student Debt, contact Harold Shepley and Associates, LLC. We have experience dealing with these situations every day. We are a full service law firm that is client-oriented and will work hard to meet your personal needs in resolving debt.
Call us today at 877-827-9006, or complete our easy to use contact form. We're ready to help.