Student Loans - What To Do When You Can't Pay

The news is filled with stories of how college graduates are graduating with huge student loan debt and little to no job prospects. Our society has put a very high premium on post-secondary education and consequently supply and demand has pushed the cost of a 4 year degree out of reach for all but the rich. So we all get student loans, which are generally low interest and if government backed can result in flexible repayment plans. A college degree is still very helpful in the job market and we know that college graduates do receive more income over their lifetime compared to those with only high school diplomas, but maybe everyone should not go to college and those that do should not look at higher education as only a springboard to a good paying job. Naturally, if you focus on a high paying job that requires the degree, then it’s worth borrowing the money. When we graduate, there can be a sobering wake up call when we get the first student loan bill. Many have no way of repaying because they haven’t found a job, or the job that they were able to find just doesn’t pay for all the necessary expenses.

If you or someone you know finds yourself unable to make the student loan payment, here are some strategies:

Federal Student Loans:

• Consolidation: Welcome to the assistance plan of the federal government. You can consolidate and lower your monthly payment. This may depend on whether or not you are in default. For those in default, there aren’t as many options.
  
  
• Loan deferment: You can apply to have your payment deferred if you are going back to school or if you are not working. This is temporary though and upon graduation, rehire, or after a set time, you will have to restart your payment and you may or may not have interim interest forgiveness.
  
  
• Income Based Repayment: This is a program offered by the federal government that may result in a very low payment for a term of years followed by complete forgiveness.
  
  
• President Obama’s Student Loan Forgiveness Program: President Obama has provided some relief to graduates with lower incomes through programs called Interest Forgiveness ; Pay As You Earn; Public Service Loan Forgiveness; and Teacher and Disability Forgiveness. Each of these programs has specific qualifications, but you don’t need a lawyer to assist as you can work directly with the lender. Check with your lender to see if you qualify.
  
  
• Compromise or Write-Off: The Federal Department of Education has the authority to suspend or terminate collection on FFELs or Perkins Loans of any amount. If the government determines that you are unable to repay within a reasonable time or the cost of collecting and the time involved is just too high for the government, or the government’s case for collection has some flaws in it, then you may get this pre-Christmas present! Difficult to get and you’ll need a lawyer.

Private Student Loans:

There are fewer options than with Federal Student Loans, and you will definitely need a lawyer if you are in default. But don’t wait too long to contact a lawyer, as your options become fewer with the passage of time (More to come about Private Student loans in the next Newsletter).

If you have a student loan repayment problem or you know someone who does, call me today at (503) 363-7334 for a free consultation to see what your options may be.