The student loan debt in the United States currently stands at around $ 1.6 trillion. This crisis is made worse by the fact that only a small fraction of the 45 million borrowers have been diligent in their repayment plans.
Well, there are varying justifications as to why much of the national student debt loan is still unpaid. Most borrowers remain committed to paying their student loans. However, unemployment and the high cost of living top the list of constraining factors when it comes to adhering to repayment plans.
Are you wondering how to deal with student loans? You are not alone. Most of the 40 million defaulters still hope to find their way around paying back their dues.
Read on to find out how to deal with that impending student loan that’s denting your credit record.
1. Calculate Your Impending Debt
When dealing with any debt situation, the first most crucial step should be to calculate how much you owe. You might have an accumulation of both federal and private loans. Before anything else, you need to buckle up and do the math.
Once you understand the actual amount owing, it’s possible to make a well-informed repayment plan. Before anything else, consider having a real picture of your debt situation. This would help you develop a roadmap and ease the burden of repayment.
2. Review the Terms
You probably applied for your student loan while still relatively naïve. Now that you are older and facing the world head-on, it would help to review the terms of the loan. Focus on the interest rates and the various underlying repayment rules.
Such information is critical in the calculation of underlying penalties and accumulated interests.
At this point, it would help to consider advice on the implications of the various loan terms. Debt from student loans often accumulates due to the failure to review the underlying conditions of repayment.
3. Review the Grace Periods
Once you start focusing on the devil in the details, you’ll realize certain aspects of the student loan repayment you hadn’t seen before. For instance, most student loans have a grace period. This period seeks to provide every student with the maximum period within which the loan is payable without attracting fines.
You may be surprised that you still fall within the loan repayment grace period. But even if you have outlived the grace period, you might realize that strict penalties don’t apply immediately. Such information can help you manage your repayment schedule better and ease the tension on your end.
4. Focus on the Loans With the Highest Interest
Whether you are paying a single loan or multiple loans, your interest rates are bound to increase with time. You need to assess your mortgage and the accruing interest rates again as a matter of urgency. Once you establish the accruing interest rates for each loan, you can choose where to start.
The best approach when repaying your loan would be to start by offsetting those that accrue higher interest rates. This approach will help you cut on the burden of repayment in the long-term. Settling high-interest loans first may also play a critical role in boosting your self-belief.
5. Explore Various Options on How to Deal With Student Loans
Much of the $ 1.6 billion debt is owed to the federal student loan kitty. The bad news is that there are many ways through which the federal government can seek to recollect these dues. However, the good news is that you can still have a conversation with your loan servicer on a more flexible repayment schedule.
There may be various options at your disposal to help you manage the student loan repayment process.
Graduated Repayment Plan
This option increases your repayment after every two years over the ten-year repayment window. The loan servicers often take cognizance of the fact that most employees start as entry-level employees. You can explain this to your loan servicer and enter into a loan payment plan over a ten-year repayment schedule.
Once you seek a repayment plan from your servicer, you may also have the option of an extended repayment span. The extended repayment schedule may be an additional 15 years on top of the agreed-upon deadline.
Pay As You Earn
The other repayment option you may have at your disposal is the Pay As You Earn plan. Your loan settlement plan, in this case, may be set at a monthly cap of 10% for up to 20 years. Such an arrangement gives you ample time to repay your loan.
6. Defer Your Loan Payments
As noted earlier, one of the main reasons for the high defaulting rates is the degree of unemployment. The government understands as much and often accepts loan deferment when you don’t have an active income. You may need to get in touch with your lender to follow up on your status of qualification for postponement.
What are the Risks In Case You Fail to Deal with Your Student Loans?
You may be wondering whether the non-payment of your student loan may have any consequences. Well, the answer is yes. The federal government through the Treasury has the mandate to collect funds from individuals who have defaulted on debts that are owed to any state agencies. The government offered student loans fall within this category.
As such, one of the main consequences of unpaid student loans would be an attempt by the government to recover such debts. The tax offset is among the conventional means through which the government collects such loans. If you have been wondering how to deal with student loans because of an impending tax refund offset, you can learn more here.
You may need to consider the insights of experts on cases related to tax offsets as you seek ways on how to reduce student loan debt.
The Best Way to Recover From Debt Is to Remain Committed to Your Promise to Repay
Let’s face it; student loans have been a critical support system in the acquisition of higher education. While the high defaulting rates are due to financial instability, committing to pay based on an agreed-upon plan is prudent. Are you wondering how to deal with student loans?
It may be essential to approach your lender and devise a repayment schedule. This is a crucial step before the Treasury enlists you for tax offsets.
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