Student Loan Debt Help
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Student Loan Debt relief
According to the Federal Reserve, Americans now owe a whopping $1.5 trillion in student loans (through the second quarter of 2018), making it the 2nd largest consumer debt segment in the country after mortgages. And the number keeps growing.What makes student loans different than many other loans are they are unsecured, meaning an 18 year old may obtain a student loan with no co-signer, and these loans will not be eliminated in the event of a bankruptcy.
There are two main categories within the student loan sector and those are government student loans and private student loans.
Government Student Loans
For many, government student loans make up a portion of their loans, if not all. The benefits to having government student loans are the several different repayment options available to you. Certainly you can go the refinancing route, but for many, government student loans have an already competitive interest rate.
The first repayment method includes the standard payment, which is what is given to you upon graduation and you make the same payments for the life of the note. While this option is straight forward, it may not be the option that affords you the lowest payment.
Another option you can choose from includes a graduated payment schedule. This is when your initial payments are lower, but as the life of your loan goes on, the minimum payments rise. Each payment is increased in two-year increments until the debt is paid off. The benefit to this is for the near term; it loosens up your cash flow. However, should you not be financially prepared, the payments at the end of your loans life could be more than you can handle.
If none of those fit your financial situation, then you can select an income driven payment, which is based upon your current income. While this may not be lower than what you’re currently paying, it is worth noting because if you are currently making less than what you anticipated, you can have a loan payment that is in line with your current earnings. This process is reviewed annually and can be a great way to find a payment that fits your needs.
Lastly, if none of those options fit your budget and you are searching for a lower interest rate, then you can certainly consolidate or refinance. This will not only lower your interest rate but also lower your monthly payments. With these options, you are likely to find an option that fits your needs best.
Private Student Loans
Unlike government student loans, private student loans do not afford you the plethora of options, leaving you with little to choose from. First and likely your only option is to consolidate and/or refinance your private loans. Private student loans typically have higher interest rates, but these can be lowered through refinancing, especially after you’ve made consecutive payments.
This will bring all of your payments under one note, as well as bringing your interest rate or interest rate average lower. A lower interest rate saves you money in the long run, while making your payments lower. Ensure you research the lender you refinance with because you do not want this to backfire and be in a worse situation than you were to start.
If you find yourself in the position that you are unable to repay your student loans and they currently sit as defaulted, you can call your lender and agree to a settlement amount. While this is not the most desirable of actions, it can bring you back above water and stop you from filing bankruptcy. Keep in mind with this option, it will damage your credit score, potentially making future borrowing more difficult and more costly.
Student loans in the United States continues to be an issue that many struggle with, but it doesn’t have to be this way. There are several solutions within each that can help bring your monthly payments down and save you money in interest. Remember, should you file bankruptcy your student loans will remain. Instead, you may want to look to consolidate your private loan into a loan with a lower interest rate. For those who have government loans, research the different repayment options and find one that fits your needs best.
Debtco offers you information to help explore debt solutions and will put you in touch with a debt specialist. Going to school is a huge achievement for many, but the steps necessary to attend school create a result that affects many financially. Explore our debt solutions section to learn more.