Student Loan Repayment Options

casual student or teacher in a classroomFive-figure student loan debt is a thing of the present. This debt is a completely new beast that recent graduates contend with on a yearly, monthly and sometimes daily basis. Student debt has risen 47% in the past decade; along with economic downturn, this makes the world an uncertain place for recent graduates. Students are now forced to delay the American dream of home ownership and family building, merely to survive on meager incomes that debt collectors take a huge chunk of every time. While education is one of the smartest investments a person can make, the loans do not behave like any other financial transaction on the market.

Student Loan Payments

Modern graduates owe an average of $23,000 to $25,000 in loans upon graduation. Between public and private loans, they have a few choices on payment. Many graduates choose wait the allotted six months before beginning payments. Presumably, this will be enough time to land a well-paid career minded job. Federal loans typically fall into a 10-year plan. Extending that to 25 years tacks on more interest payments, but lowers the month-to-month payments. Most American graduates are on a strict week-to-week or month-to-month budget. Meeting loan payments is at the top of their list; unfortunately, it may topple their budget and not leave enough behind for staples. Add on a car payment, rent and normal living costs, it is no wonder many graduates return home slightly defeated.

Grace Periods and Deferments

While the debt tunnel appears long and very dark, many plans do offer a bit of light. Grace periods and deferments allow graduates to get on track before beginning payments. A typical grace period is 6 or 9 months from graduation. If this period was not enough time, deferment is the next options. Students who fall on particularly hard financial times qualify for an allotted amount of time to figure things out. A deferment is also given to those who return to school or join the military. Forbearance is the last line of defense. This delays the payments for up to 12 months a limited number of times.

Loan Forgiveness

Normal loans and debt like a mortgage are erasable through bankruptcy and foreclosure. However, student loan debt never leaves your record, unless you pay it off entirely. The Public Service Loan Forgiveness Program is the only option to erase a part of debt without full payment. Working in a public service field like a library, non-profit organization, public school or local government full time has its benefits. A portion of your loan or all of it disappears once you make 120 payments towards the loan during that job.

Thankfully, there are options to reduce student loan debt. However, the fact of the matter is that graduates are starting out with worse then nothing. At least nothing has something to build up from. Graduates of 2011 gained the title, most indebted, and they must dig out of that debt before building anything for the future.

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