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Student debt is one of the biggest obstacles to young people achieving financial independence and reaching their stability goals. It is rivaled only by credit card and medical bill debt and can be challenging to handle at times. Depending on the loan’s size, some people are stuck making their monthly payments for most of their lives. When it becomes too much to bear, what are your options when it comes to getting this burden off your shoulders?
There are other options to help you manage your student loans after you have gotten your college education. You can talk to your current lender and ask them to lower your rate or eliminate your late fees if you have fallen behind in your payments.
Some college graduates have found that they can negotiate with their banks and lenders and get them to settle their debts for less than they would if the individual were working. If you are a college graduate (with a mind for business), this might be the best option for you. It will allow you to manage your student debt by making just one payment every month and not worrying about how you will pay it all off.
Another way to negotiate the interest rate is to stop paying altogether. This will affect your credit score for a few years, but you can take steps to build it back up after that. Though this is the more aggressive and risky way to do it, it’s an effective way to get their attention and work with you about the conditions you need to start making payments.
It’s just important to note that you’d be surprised at the results you can get when you’re honest and blunt about your financial situation and what you can pay. They would instead get some money than none, and if you present them with an outline of your payment strategy, they will likely take it into account and work with you.
Negotiating on your own isn’t easy, though, and most lenders are tough to budge. If you’ve done your best to reason with them, and you’ve defaulted on your, don’t fret, as over a million borrowers default on their loans every year.
You have the options to consolidate or settle. If you have more than one type of loan, this could be an excellent way to transfer all of your current student loans into one. The consolidation loan should offer you lower interest rates, a longer repayment period, and lower monthly payments. Make sure you are realistic about what you can pay off each month and how long you want your loan to last.
The downside to consolidating is that since the repayment period is lengthened, you will likely pay more interest over the long run. Also, consider that you will probably lose credit for any payments made toward income-driven repayment plan forgiveness or Public Service Loan Forgiveness.
When you default on your federal loan, and no repayment arrangements have been made, your lender will likely send the loan to a collection agency. We’ve all been there, and it’s time for you need to take action. At this point, your lender can withhold your tax refund and Social Security benefits, garnish up to 15 percent of your disposable pay, and even take your driver’s license, all without having to go through the courts.
You can settle the debt for less than what you owe in one lump sum, provided the lender agrees to do so. This is when you probably need a pro on your side to negotiate. A lawyer may be too expensive, but a good debt relief company will not charge you anything until you have reached a settlement that you agree on and are comfortable with. Some cons to settling, such as your credit will be negatively affected, and the amount of canceled debt will be considered taxable by the IRS.
Your best bet is finding a reputable and scrupulous debt relief company that can answer all questions you have about student debt settlement pros and cons. It’s easy to forget that your debt does not define you, and you don’t have to live with it the way you have been. Shake things up, consult some professionals, and get your debt back into your own hands.