Repaying the money you borrowed to pay for college can be one of the most stressful things about graduating. Knowing that you now have a rather significant debt to repay, and that the lender is willing to consider your employment situation only so much, can be a fairly significant emotional burden. And if you do fall behind on your student loan payments, especially if it extends beyond 270 days when the loan is considered in default, the consequences tend to get severe.
What can you expect to happen if your student loan is in default?
• Late fees and collection costs will be added to your existing debt
• Loan payments can be deducted from your paycheck
• State and federal income tax refunds can be confiscated
• Credit reporting agencies will be notified and your credit score affected negatively
• Future access to federal student aid is forfeited
• Lawsuits can be filed against you that include what you owe, as well as attorney’s fees and court costs
You should also not assume that filing for bankruptcy will wipe out your student loan obligations, as it can for some other unsecured debts. Federal student loans are not eligible to be discharged in a bankruptcy, so even if you file you will still be on the hook for whatever you owe.
Despite the inability to discharge the loan, there are options. Whether you are in the midst of filing for bankruptcy because your overall debt is too much to handle, or your only issue is your student loan and you are looking for a way to get the payments under control, you might be eligible to:
Extend Your Repayment Window
The extended repayment option still requires month payments, but they are lower because the term of your loan is extended. You will be making student loan payments for a longer period of time and paying more overall in interest, but your payments become manageable on a monthly basis.
This option extends your payment plan, but only by two years, so you are not paying that much more in interest. With graduated payments, you start out with small monthly payments that increase over time. This option assumes that over the years, your earnings will go up and you will be able to pay more, even if you get off to a rocky start.
Income Sensitive Payments
This payment option bases your monthly payment amount on how much income you report on your tax return. As this amount increases, so do your monthly payment obligations.
In addition to these three options, you might also be able to put your payments on hold for a period of time without any penalties. With deferment, you may have a right to postpone payments on your loan for a period of time. Deferment suspends loan payments based on a specific circumstance, such as unemployment or financial hardship.
It might also be possible to reduce the interest rate on your loan by setting up a payment arrangement that ensures monthly payments are made automatically. This also means you won’t need to worry about forgetting loan payments or need to mail a check every month.
If you are struggling with your student loan payments or you have other questions about financial hardship, we can help. Contact the Law Offices of Robert M. Geller at 813.254.5696 to discuss your student loan debt and how you can best manage it.