It is common knowledge that further American education is an expensive endeavor. The average in-state student ends up paying more than $50,000 per year to get a four-year degree from a public college. Private and elite colleges typically cost even more, with institutions like Harvard and Stanford costing more than $200,000 for a four-year degree. It seems that education is only continuing to get more expensive as time goes on, and even online colleges are joining the expensive trend.
These high education costs are fueling a surge in student debt statistics. The average college student will be approximately $30,000 in debt by they time they graduate or stop taking classes. With that said, there are many students who end up with an even higher amount of debt, depending on their individual circumstances. If you find yourself in the same boat, keep reading to learn more about student loans and how you may be able to manage them.
The idea of student loans is made even worse when you take into account that finding a job after college has become an increasingly difficult task. In fact, a graduate may not be able to find suitable employment for several years following their leave from school. This matter becomes even more of a burden if you are unable to finish your degree. Because many student loans start accruing interest after graduation, this fact can be difficult to deal with.
As if matters weren’t already bad enough, student loans typically can’t be removed in the case of bankruptcy. While these loans may not be considered “secured”, they are protected by the government as unable to be forgiven by filing for bankruptcy. With that said, there may be special cases where some student loans could be eligible for forgiveness during bankruptcy; although, most debtors are unlikely to qualify for this exception.
Eligibility requirements for student loan forgiveness during bankruptcy may include having proof that repayments would cause an “undue hardship” threatening the debtor’s survival. Guidelines for an “undue hardship” may be met if the debtor has a chronic disability, is unable to work due to their physical or mental health, or is nearing retirement with no future sources of income. It is unlikely that most debtors would meet these guidelines.
Types of Student Loans
Student loans can typically be categorized as either privately-issued or government-backed. The Pell Grant is technically part of a third type of student aid and does not need to repaid under typical circumstances. Although it is a very popular aid option, they are not usually grouped in categories with other student loans.
A private loan is issued by a private, for-profit bank and is not guaranteed by any government agency. These loans can total any amount and are given directly to the student, but they also typically have much higher interest rates and are difficult to manage after graduation.
Government-backed student loans can be categorized as Stafford Loans, Perkins Loans, or Direct Loans. The loans act similarly to private loans but often come the limits per semester that cause students to seek additional forms of aid. The positive side is that these loans usually have much lower interest rates and might not need to be paid back until a certain period of time following a student’s graduation.
With that said, government loans cannot be forgiven through bankruptcy or through a debt settlement program. For debt relief with these loans, former students must typically enroll in a restructuring program offered by the government. Students struggling with paying back their Direct or Perkins Loans may qualify to enroll in the Federal Direct Consolidation Loan program. This program works as a typical debt consolidation program does and will generally reduce the total amount of debts.
On the other hand, students with Stafford loans could qualify for “income-based repayment” programs which also work generally the same as typical debt consolidation programs do. Typically, the borrower will qualify if their annual loan payments add up to more than 15% of their gross pay. This program work as a restructuring plan to guarantee that the former student will not have to pay more than 15% of their income toward their student loans. These loans typically do not lessen the amount the borrower owes; they simply make it easier to pay off the total debt over a longer period of time.
Student Loans and Debt Settlement
.In comparison, private lenders are more likely to accept a settlement on a delinquent loan. These lenders are more likely to take a loss in this situation, so getting any money from you would be a benefit to them. Instead of selling the debt to a collection agency, they will likely get more money from you after a negotiated settlement.
While nothing can be 100% guaranteed, a professional debt consultant will likely have a much better chance of success negotiating with your creditors than if you did it on your own. These financial experts have likely worked with your lenders before and know how to use the right practices to encourage a successful agreement. If you do choose to pursue debt settlement for your student loans, it’s important for you to remain realistic with your expectations. Your patience will likely pay off in the long run when your debt is significantly reduced and you’re on your way to financial freedom.
If you would like to talk about how you can manage your student loans, Strategic Debt Relief can offer expert advice regarding your situation. Fill out our short application online and get an immediate response, or call us at 877-297-4477 for a free consultation today.