How To Get Your Student Loan Debt Under Control
Did you know that there is over $1 trillion in student loan debt in the U.S. and that 1 in 5 households in the U.S. have over $26,000 in student loan-related debt? It’s mind boggling to think of how many people’s lives are being ruined by this new form of indentured servitude.
With tuition costs rising at an exponential rate and an economy that has yet to fully recover, many well-intentioned graduates are having a tough time getting their finances in order, and the burden of crushing student loan debt certainly doesn’t help the situation.
But did you know that there are ways to protect your rights as borrowers and repay your federal and private loans without being harassed? If your student loans are in default or you simply can’t afford your minimum monthly payment, you should consider hiring a student loan lawyer to get you back on track. Take a moment to ask yourself these questions:
- Are you receiving debt collector calls?
- Are you being sued for failure to pay your student loans?
- Are you in default and unsure of how to get back on track?
- Are you unable to afford your current minimum payment?
- Would you like to know if your student loans are dischargeable in bankruptcy?
- Would you like to know whether consolidation or rehabilitation is better for you?
If you answered “YES” to any of the above, it’s probably time to seek the help of a student loan lawyer.
Federal vs. Private Loans
It can be confusing to differentiate between federal and private student loans, but if you have to choose, always choose federal over private loans to finance your education. Here’s a tip to determine what kind of loan you have: look at the top of your monthly statement. All federal loans will state the federal program (Stafford, PLUS, Perkins, etc.) at the top. You should always exhaust all federal loan options prior to borrowing money from a private lender.
Federal Loans: Federal loans are funded by the government and are not dependent on credit-worthiness, though your financial need does come into play to determine what type of loan you can quality for.
Private Loans: Private loans are not associated with the federal government and are provided by private lenders such as credit unions, banks, and schools. To qualify for these loans, you will have to meet certain credit criteria. Private student loans do not have the same mandatory protections when your finances get tight, such as deferment , forbearance, and rehabilitation programs, though some lenders, such as Wells Fargo, have limited programs similar to the government for borrowers who have suffered a financial hardship.
Federal Student Loans
Stafford loans fall into two categories: Direct Subsidize loans and Direct Unsubsidized loans. Stafford loans are only administered through the Direct Loan program, which means that the federal government directly disperses the loan proceeds directly to the borrower. No financial institution or other lender is involved.
Direct Subsidized loans are a financial godsend because the U.S. Department of Education pays the interest:
While you are enrolled at least half-time in school
For the first six months following graduation, unless the first disbursement is made on or after July 1, 2012, and before July 1, 2014
And during a period of deferment.
Direct Subsidized loans are awarded based on financial need determined by a number of factors, such as expected family contribution and your adjusted gross income based on your most recently filed tax return.
Direct Unsubsidized loans are available to all graduate and undergraduate students without the need to show a financial need or a particular credit-worthiness. The amount you can borrow is determined by your school based on the cost of attendance and any other aid you may receive. Students who borrow unsubsidized loans are responsible for the interest at all times, which means that during the time periods that the student is not paying, the interest will be capitalized (added to the principal amount of your loan) .
PLUS loans are also through the Direct Loan program. PLUS loans are available to parents for dependent children seeking an undergraduate degree and who are enrolled at least half-time. The Grad PLUS loans are available to graduate and professional students. I have my fair share of these as a part of the $105,000 I owe Uncle Sam. The interest rate on PLUS loans is generally higher than Stafford loans.
Perkins loans are for both undergraduate and graduate students who can demonstrate an extraordinary financial need. Perkins loans are serviced by the school you choose to attend and are funded by the federal government. If you default on your Perkins loans, you school may turn your debt over to the federal government for collection.