Lifetime Debt for College Loans: An Ounce of Prevention Is Worth a Pound of Cure
The average debt load for graduationg seniors in now $20,000. This doiesn't count what their parents may owe.
Is this you? If so, you're trapped. Someone should have warned you. No one did.
This appeared in USA Today.
If your student loans loom large now, just try ignoring them. They'll get much, much bigger.
Once your loans go into default, your lender would probably turn your account over to a collection agency. The agency's fees would be added to the balance, increasing the amount you owe. The government might also withhold your tax refund and garnish some of your wages.
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And unlike with most other debts, there's no statute of limitations on the government's authority to pursue unpaid student loans, says Deanne Loonin, staff attorney for the National Consumer Law Center. "That means these debts can follow you your whole life."
The encouraging news is that these unfortunate consequences are avoidable. The federal loan program offers numerous alternatives for borrowers who can't afford their monthly payments. To take advantage of them, you need to contact your lender as soon as you run into trouble. . . .
The article goes into ways to repay. Several involve stretching out your loan. Don't do this. Get out of debt before the normal 10-year limit. You need to become debt free. Save.
If you are planning to marry, you will soon become a co-signer for your new spouse's debts.
The article continues:
If you can't afford your loan payments, even with a longer-term or income-sensitive plan, don't flee the country. There are alternatives. The two most common:•Loan deferment. Borrowers who return to college, are unemployed or are suffering from economic hardship may defer repaying their loans for up to three years. Interest on Perkins loans and subsidized Stafford loans, which go to students with financial need, won't accrue during the deferment period. Interest on unsubsidized Stafford loans, available to all students, will accrue during deferment.
Lenders are required to grant deferment to eligible borrowers. You'll have to fill out a form and may need to provide documents supporting your case.
•Forbearance. This also lets borrowers temporarily stop payments, or pay a reduced amount. Forbearance is granted at the discretion of the lender, but the standards aren't as strict as those for deferment, says Paul Combe of American Student Assistance, a company that helps borrowers manage their loans. Having a lot of credit card debt, for example, won't qualify you for a deferment, but you may get forbearance, Combe says.
The biggest drawback to forbearance: Interest will accrue on the loan, no matter what kind of loan you have. That will increase the amount you owe when you emerge from forbearance. For this reason, Combe says, "Forbearance should be seen as a last resort."
It's important to continue making payments until your request for deferment or forbearance is granted. If you fail to make your payments for nine months, your loan will be declared in default, and you'll be ineligible for either form of relief.
"A borrower working in good faith should have no reason to default as long as they stay in touch," Combe says. "When they get in trouble is when they start hiding."
Here is what you should have read: