We’ve just added another one in the list of the most certain occurrences in life aside from death and taxes – student debt. After the credit crunch in the late 2000s, thousands of students in the United States have had to struggle paying off their student loans, which average $21,000 per student.
The average student today is either employed or underemployed and is having problems with payments. The problem has become so massive that even President Barack Obama is as perplexed as everyone else in addressing the issue.
Next month, the ballooning student debts will exceed credit card debts in the United States for the first time. By the end of 2012, student debts will amount to about 1 trillion dollars. It’s expected to become a major presidential issue in the elections next year in the light of the rising cost of college of education.
Obama believes it’s not fair for a student to amass substantial debt to graduate and be unable to land a job. Roughly, 9 per cent of graduates in 2010 are still unemployed.
More Relief Coming
Education industry analysts are expecting changes in a 2007 income-based repayment program to provide extra relief for some borrowers. Steps are, likewise, being considered to allow different types of loans to be bundled together and serviced by a single debt service provider.
These steps are proposals for now, just like the $447 billion plan launched by Obama last September to generate more jobs. But while the president and Republican lawmakers are in lock horns over this issue, lenders are calling and mailing students every day to pressure them to pay up or else.
Since the start of the global financial crisis, lenders have been calling not just a few hundred delinquent debtors across the country, but tens of thousands, many of them jobless and facing one of the toughest job markets in this century.
While Obama and his critics are probably using this issue to prop up their candidacies in the National Elections next year, if you’re one of these students with an unpaid college loan, you can start making your move now by resorting to student debt relief mechanisms that are already in place. There are plenty of options for you to choose from. If you’re still unemployed, this is a good time to use your spare hours productively.
Long Term
If your money problems are long term, there is alternative payment plans you can explore. While extending your payment terms may lower your monthly payments, you could actually be paying more in the long run.
Remember that every time you add more years to your repayment plan, you will necessarily increase the total amount you pay over the life of the loan because of the interest and service charges components. For example, if you have $20,000 in debt on a standard repayment period of 10 years, you’ll be cutting your monthly bill by 34 per cent if you extend your payment period to 20 years. However, your cost of interest will be more than double in the course of 20 years.
This is a bit tricky. A $10 or $20 difference in your monthly payment could make a difference between two to five years. You need to have your pen, paper, and calculator handy for this. At the end of your meeting with your loan advisor, make sure to request a copy of the computation for your future reference.
Loan Forgiveness
One of the greatest strengths of this country’s student financial aid effort is the student-friendly and creative “loan forgiveness” or “loan repayment” programs for college graduates.
These Options can be Summarized as Follows:
- Join Major American Volunteer Organizations.
If you have time to involve yourself in social welfare activities, then you make yourself available to organizations that can help lessen, if not totally eliminate, your student loan. Volunteer organizations, like the Peace Corps and Volunteers in Service to America (VISTA), can help reduce the amount of your student loan by serving the volunteer organization for a required number of hours. - Join the Teaching Force.
Full-time teachers of elementary, middle, and junior high school students from income families are entitled to have their student loans eliminated in exchange for years of their service. If you work for 10 years, for example, your entire student loan would be forgiven. Details of this incentive are available in the website of The American Federation of Teachers. - Enlist in the Military.
When you join the armed forces, you can avail of the benefit of the student-loan repayment program. You have to select the branch of the military offering a student-loan debt forgiveness program because not all branches offer this repayment and forgiveness plans. - Practice Law or Medicine in Low-income Communities.
Lawyers, paralegals, doctors and nurses can avail and have their student loans forgiven if they work in public interest organizations in non-private capacities. This debt forgiveness privilege is also given to health workers in areas with inadequate medical care facilities. - Choose an Income-Based Repayment Plan.
An income-based repayment (IBR) plan is a combination of the repayment as well as forgiveness programs. When you opt for this loan repayment plan, the amount you pay on a monthly basis is determined by your income, family size and the total amount of outstanding student loan debt.
These remedies are available to you only if you have not yet defaulted on your loan. If you’re already in default, the doors for possible deferment or forbearance or refinancing are closed. It’s important, therefore, that you anticipate the coming of your student loan repayment problems and act on them before complications happen.
Loan Repayment
If you’re a private student loan borrower, your best bet is the loan repayment program. This program is available for both federal funded and private loans and is, therefore, more widespread in terms of coverage. Under this program, you can receive additional funds to pay part of your debt to give you a breather. You can, likewise, decide to restructure your loan.
Before you receive these funds, however, you need to apply for this facility. You also need to explain to the lending institution why you need the extra funds, which is no longer difficult to do given the high profile nature of the problem of student loans.
In fact, all you need to do is give a name and a face to the problem of student loans. In this case, it’s your name and your face. When your application is approved, you can receive additional funds that you can use to pay your loan partially and help you restructure it, with easier on the pocket monthly payment terms and longer payment period.
This plan also allows deferment and forbearance. Deferment provides for temporary suspension of payments without interest during the period of suspension, while forbearance allows also for temporary suspension of payment but with accrued interest payment during the suspension period.
Mounting Problem
The problem of unpaid student loan is mounting every day. This will continue to grow as long as the government is not able to put in place a viable program to once again perk up the American economy and generate more employment.
Unfortunately, this problem is something that can’t wait while the government tries to figure out what to do. You cannot afford to default on your loan and run the risk of being unable to avail of the debt relief options designed to extend the term of your loan or if your loan is federally funded, to be forgiven.
While the government is doing its share to ease some of your pain, you need to keep your student loan active while devising plans to avail of the various debt relief efforts being provided by the government, some of which are to be implemented in 2012.
The government’s relief efforts are not permanent and should not be. Low-interest loans are by themselves a big boon for struggling young Americans, who aspire for college education. In normal times, part of the struggle is paying off these loans to allow others to enjoy them as well.
However, right now, the call of the times is for student debt relief. If you haven’t started yet, you can begin looking for options to seek for loan deferment, forgiveness, loan repayment and other forms of relief. You can, likewise, double your efforts to find employment in both public and private sectors so you can start earning on your own and begin paying off your student loan.
While this may not be a good time to be choosy about employment, you can also seek employment opportunities in the military, police, academe, specific volunteer organizations, and public sector where you can hit the proverbial two birds with one stone – employment and substantial loan credits to pay off your loans.
No matter what your choice will be, the most important thing is to keep yourself useful and productive while supporting the government’s efforts to keep the doors of college education open to every American, who wants it and dreams about it.
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