According to an article by MarketWatch, the student loan debt in America is growing at a rate of $2,726 per second! Are you one of millions of American’s struggling with student loan debt? Student loan debt doesn’t have to be forever and it doesn’t have to kill you.
Find out the best way to pay off your student loans by being aware of all your options for repayment, forgiveness or discharge.
Income Driven Options
According to government sponsored site Studentaid.ed.gov, there have been a number of federal programs instated to help people with student loan payments based on income.
- Revised Pay As You Earn Repayment Plan (REPAYE Plan)- Generally 10 percent of your discretionary income.
- Pay As You Earn Repayment Plan (PAYE Plan)- Generally 10 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount
- Income-Based Repayment Plan (IBR Plan)- Generally 10 percent of your discretionary income if you’re a new borrower on or after July 1, 2014, but never more than the 10-year Standard Repayment Plan amount. Generally 15 percent of your discretionary income if you’re not a new borrower on or after July 1, 2014, but never more than the 10-year Standard Repayment Plan amount
- Income-Contingent Repayment Plan (ICR Plan)- The lesser of the following:
- 20 percent of your discretionary income or
- what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income
To find out if you are eligible for any of these programs, check out the Federal Student Aid site here. These programs can provide temporary relief, but the forgiveness period can take 20-25 years! Keep reading for information on how to get out of student loan debt much faster.
Not to be confused with student loan consolidation. Refinancing takes your loans (some lenders will combine federal and private loans) and puts them in a single loan and endeavors to find a lower rate for you. Lenders like SoFi, estimate they save their borrowers up to $14,000 on average on student loans. Not bad…
There are two types of consolidation: Federal and private. As mentioned above, some lenders, (like SoFi) will take both your federal and private loans and package them up to provide you a lower rate. Then there is also the Federally sponsored consolidation which can lower your monthly payment, but will extend your loan time causing you to pay more interest and money overall. Again, this is a good option for temporary relief, but you want to be able to get out of debt as soon as possible, so use it as needed.
Statue of Limitation
This applies to private lenders and loans obtained directly from a private school. The statue of limitation will vary by state, so contact someone who can assure you this is the case for your loan and in your state. Check out bennerweinkauf.com/ to read more information on legal advice.
This limitation means that there is a timeline for which you can be sued by the lender for a loan in default. FYI: Should you opt out of repaying your Alma Mater, they may withhold documentation like transcripts or diplomas. This is done on an institution by institution basis, but it is a possibility. We were in this situation (owed a loan for which the the statue of limitation was in effect) but still paid. It was the right thing to do since the money was borrowed and the promissory note signed. That was our personal decision- to respect the agreement that was made.
Getting a student loan discharged can be difficult in some situations, especially bankruptcy, but it is not totally impossible. According to IllioisLegalAdvocate.org there are only a few ways that your loans can be discharged:
- Death of the borrower
- Bankruptcy (in some cases)- must prove that loan repayment would cause “undue hardship on the debtor and the debtor’s dependents.”
- Total and permanent disability
- Closed School or False Certification Defense
Again this option is the least likely scenario and should be resorted to only if it’s an absolute necessity.
Find & Work a Debt Repayment Plan
At the end of the day, student loan debt is just another debt, albeit a debt that is really hard to get rid of passively. Some of the options mentioned above are good if you are in a pinch, but the reality of the matter is that you want out NOW! In the end, you’ll need to increase income with side hustles and decrease expenses very consciously. It never ceases to amaze me when people tell me how indebted they are, yet I know for a fact they live very lavishly. As I say, you can’t wish yourself out of debt! You’ve got to have an active plan. If you need a jumpstart, check out my free eBook, Get out of Debt Now and as an immediate follow-up, Dave Ramsey’s Total Money Makeover. As you educate yourself, budget, hustle and take action, you will be in the best position to get rid of student loan debt faster than ever!
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