What you dont know about student loans

student loan payments

Student debt in the United States has now passed the $1 trillion mark.  This debt is now substantially greater than both credit card and auto debt loans. Although, student loans provide people with the opportunity to get college education, there are still significant costs to borrowing this money. For example, borrowers often have to deal with high interest rates, threat of delinquency, and the possibility of wage garnishment which the federal government has the power to do if you fall delinquent on your loans.

Although, student loans are becoming more common, many people are still unsure about the details of their loans, especially the loan repayment process.

Types of student loans: Federal Loans vs. Private

It’s essential that you know what type of student loan you have before you begin negotiations. Not sure what type of loan you have? To find out the what type of loan you’ve borrowed, click here, or call the Department of Education’s National Student Loan Data System (NSLDS) 800-4-Fed-Aid. You will need your FAFSA PIN to access this information.

Federal Loans are generally capped by law at a specific rate, whereas private loans don’t have a specific interest rate limit governed by law. Federal loans also have less strict credit score requirements, if they are required at all. For borrowers that may fall behind during the repayment period, the federal loan programs offer an array of programs to offer borrowers relief.

The process for obtaining a private loan is similar to that of applying for a mortgage. Oftentimes, the borrower must clear a credit screening process, sometimes requiring a co-borrower and the borrower is given a disclosure statement covered by the federal Truth in Lending Act.

Struggling to Keep Up?

First, its important to note that you are in default on most federal student loans if you fail to make payments for 9 months. The entire loan balance becomes due once you default. A delinquency period begins on the first day after you miss a payment. Therefore, if you find yourself in a position of struggling to pay your loans, communication with your loan provider is key to obtaining assistance and clarity. Learn what you can do if you find yourself unable to pay your student loans. Helpful tips for dealing and speaking with your loan provider.  Default and Delinquency Tips. 

Federal Loan Repayment or Non-Payment Options

Repayment Plans – Check out more detailed information with the Student Debt Repayment Assistant

  •     Deferments
  •     Forbearance
  •     Flexible Repayment Plans: Extended Repayment Plans or Graduated Repayment Plans
  •     Income-Based Repayment Plans
  •     Income-Contingent Repayment
  •     Income-Sensitive Plans for Federal Family Education Loans (FFELS)
  •     Consolidation
  •     Compromise/Settlement

Federal Loan Cancellation
Federal loans can be cancelled in very limited circumstances – Look at this information from the National Consumer Law Center.

  •     Issues with the school attended: Closed school, unpaid refund or false certification
  •     Disability Cancellation
  •     Death Cancellation
  •     September 11th Cancellation
  •     Military Service Cancellation
  •     Job-Related Cancellation – certain professions
  •     Perkins Loan Cancellation
  •     Public Service Cancellation
  •     Cancellation after 25-years of Repayment

What about bankruptcy? If that an option?

Student loans are generally not discharged in bankruptcy, but that’s not to say it’s impossible if the bankruptcy judge determines there’s a significant hardship in the foreseeable future due to repaying this loan. Here’s more information on bankruptcy and student loan debt – click.

Sandy Disaster Relief for Student Loans

For students residing in disaster zone as a result of Hurricane Sandy may be eligible for relief. This has already been extended once and will be available only up until the end of this month – June 30, 2013. Don’t let this deadline pass if you’re eligible, reach reach out to a New York State Higher Education Service Corporation (HESC) representative.

If you’re struggling to make payment because you were displaced from your home, you might qualify for an administrative forbearance for up to 3 months where payments are temporarily postponed or reduced, but interest continues to accrueStudent Aid has these resources.

Learn More

1. Get familiar with your National Student Bill of Rights.

2. Thinking about borrowing for college?  Print out this list of top 10 questions to ask your lender.

act now

1. If you feel that your National Student Bill rights have been violated complete this complaint form and send to the NYS Attorney General’s Office.

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