Managing Student Loans: Your Options In a Nutshell
We work hard for our college degrees. Four long years of early morning English classes, late night study sessions, and caffeine and chocolate fueled finals weeks. Perhaps you chose to go on with your education and ended up with a Master’s, or even a law or medical degree.
If you were one of the lucky ones, you might have made it through those four (or more) years of college not having put yourself in debt for the privilege.
For the rest of us - well, we weren’t so lucky. It is becoming all too common to find ourselves owing $10,000, $25,000 or even $200,000 or more.
For students taking out federally backed student loans in 2015, the interest rate will be 4.66% for undergraduates and 6.21% for graduate students. The rates for private student loans issued by private financial institutions and without government backing vary, and are dependent on the repayment option you choose, the prevailing prime interest rate, your creditworthiness, whether you have a cosigner, and other factors. Generally, however, private student loans cost more than federally backed loans and carry with them other fees like origination fees.
Here’s my point: If you come out of school with a shiny new diploma and an “average” federal loan balance of $26,000, you’ll make payments of $271 per month for ten years. If, however, you owe $75,000 in loans, you’ll pay $783 per month for ten years.
And, if you opt for the ever-increasingly popular graduate degree and take out $150,000 loans during your college career, you’ll be expected to repay your loans at $1,566 per month.
Compare those figures with the average starting salary for the Class of 2014: $45,473, which translates to a rough “take home” pay of around $2,600 per month (not counting insurance or other employer benefits).
It’s not hard to see why so many new graduates have difficulty paying their student loans and why the default rate (more than 270 days delinquent) according to the Department of Education was 13.7% as of Sept. 30, 2013.
You Have Options
Perhaps you came here to the Bankruptcy pages to learn about how you might use bankruptcy to discharge or manage your loans. We’ve got that. But we also recognize that bankruptcy is not the solution for everyone. Here are some others:
- Deferment and forbearance
- The Difference Between Delinquency and Default
- Dealing with Collectors
- Your rights under federal and state law
- Repayment Strategies During Tough Times:
- Loan consolidation
- Income Based Repayment (IBR)
- Income Contingent Repayment (ICR)
- Income Sensitive Repayment (ISR)
- Pay As You Earn
- Loan Extension
- Graduated Payments
- Surviving Default
- What happens when you default and how the Department of Education collects your debt
- Finding Your Loan Servicer
- The Rehabilitation Process
- Getting out of Default
- Bankruptcy Options
- Strategies for discharging private student loans in bankruptcy
- Discharging government backed student loans in bankruptcy
- Using Chapter 13 repayment plans to manage government backed and private student loans
- Public Service Loan Forgiveness
- When your school closes
- Determining the kind of student loan you have and who you need to contact about it
- When a student loan borrower dies or becomes disabled