Dealing With Student Loan Debt

الثلاثاء، 23 يونيو 2015

By Freida Michael


Financial difficulty and growing responsibilities make student loans challenging to repay. There is a possibility of relief through the federal student loan debt management program. After exposing your forbearance and deferment and fully aware of the effect of default, it is time to explore the options available to make your financial situation easier to handle.

A common option available to individual is the extension of the normal repayment period of ten years or 120 installments. The management of this program considers how much you earn before making any adjustments. People who have applied for other education loans and those earning lower salaries are eligible for the relief.

Pay As You Earn is an excellent program especially for individuals who have additional education loans to service. The government wipes off your remaining balance if you make the required repayments, which are usually 120 installments. The maximum amount on your installment stands at 10 percent of your discretionary income. The relief will avail more money for other uses and leave you with better access to more credit.

To benefit from Pay As You Earn/PAYE, you must show evidence of financial difficulty. Beyond that, you must have received your first federal loan on or any date after October 1st 2007. PAYE is only available to those who have either Federal Direct or Direct Consolidation loans as of 1st October 2011. This is enough evidence that you are facing difficulty paying and are ready to wipe out the debt.

Income Based Repayment plan or IBR was created and is managed by the federal government. It targets education loans by capping the maximum repayment installment at 15 percent of discretionary income. The repayment period is adjusted to 300, 240 or 120 installments depending on your financial situation. This will provide relief to debtors willing to pay but are facing financial difficulty.

There are special requirements that must be fulfilled to qualify for Income Based Repayment or IBR. The two main considerations is a large family or growing number of dependents and a lower level of income. Instead of the standard repayment period of 10 years, an adjustment is made based on income available to your family based on its size.

Income Based Repayment is usually hinged on the number of dependents and your total income. It means that you will not be making payments based on interest rates. The cap is placed on 10 or 15 percent of your discretionary income computed purely on the basis of number of dependents and income. Despite the fact that interest continues to accumulate, your balance will be forgiven after making the necessary payments.

Defaults on student loans come with harsh consequences which dent you credit rating, among other harsh consequences. You will be labeled as a defaulter if you will not have made any payments within 270 days. The education loans management plans are an excellent way to maintain a good credit rating and managing your debts.

Some of the excellent repayment and management plans besides the Standard Payment Plan are Contingent Payment Plan, Pay As You Earn, Guaranteed Payment, Extended Payment Plan and Income Based Repayment. Consultants in management of education loans make it easy to choose a plan that fits your financial situation. These plans are designed to ease your financial burden and keep you away from default.




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