Failing to pay your student loans is a serious matter, but it’s not an insurmountable problem. Actions can be taken to rectify your loan default, but it’s crucial to engage with your loan provider instead of avoiding them. Neglecting your loan issue won’t make it disappear and will only worsen your circumstances. If you find yourself in default, it’s imperative to take measures immediately to resolve the problem and move on. It may seem daunting to have to repay thousands of dollars, but rest assured there are options available to you.
Presently, bankruptcy does not absolve student loan debts. Continuous avoidance of your debts will ultimately lead to wage garnishment – student loan creditors will recover their dues one way or another. Rather than seeking an easy way out, tap into the official procedures available for your aid. There are multiple strategies to recover from loan default.
1. Consolidation
Consolidation is typically the only route to reduce the interest on student loan repayments, thus making them more manageable. However, it’s critical to note that once consolidation is chosen, other repayment options will no longer be accessible. Prior to pursuing this approach, learn what the interest rate would be and confirm if this will lead to feasible monthly payments. To initiate consolidation, get in touch with your loan provider.
2. Peace Corps and AmeriCorps
Both programs offer service periods during which your student loans can be deferred. You need to commit for a minimum of two years in the Peace Corps, whereas it’s often a year for AmeriCorps. Such programs not only provide an opportunity to save money for your repayment plan but also offer a student loan allowance at the end of each service term. To be eligible for the Peace Corps, your only form of debt must be student loans, but AmeriCorps offers eligibility to all.
3. Student Loan Forgiveness
Some individuals can be eligible for partial or total forgiveness of their student loans. Examples include teachers employed in low-income or high-need areas, employees of non-profit organizations, and certain types of public servants. The Student Aid government site provides a full list of possibilities for student loan forgiveness. Every bit counts, and these benefits may prove instrumental in setting recent graduates on a promising career path.
4. Income-Based Repayment
This repayment plan is calculated based on your income. However, it’s essential to approach these plans carefully as they can sometimes have unwanted consequences. If you are earning a minimum wage after graduating, this may be a suitable option for you since the loan payment is a percentage of your income. If in the future, however, you secure a more lucrative job, you’ll be required to pay a percentage of this new income towards your loans.
5. Complete Your Education
If you have student loans but haven’t yet graduated, you’re in a less than ideal situation. Possessing a degree increases your chances of landing a job and often leads to better-paying roles. Also, while enrolled in school, student loan payments are automatically deferred. Consider alternative ways of financing your education such as part-time work, applying for multiple scholarships, or taking on a work-study role.
6. Budgeting
Many individuals lack a sustainable budget that they adhere to. There might be chances to cut back on expenditures such as entertainment and travel which would then enable you to meet your monthly student loan repayments. Partner with a financial advisor to devise a practical budget that covers all bills, including your student loans.
Handing over tens or even hundreds of thousands of dollars in student loans to an 18-year-old might not prove to be the best decision. Sadly, many students do not comprehend the magnitude of their debts until they graduate. Try to limit the loans you take out, but if it’s already too late for that, don’t lose hope. Begin exploring repayment options and ways to reduce interest today.
