According to College Board, the average cost of tuition and fees for the 2016-2017 school year was over $33,000 to attend a private school and almost $10,000 to attend a public college if you are a resident of the state.
So a four year degree is going to cost you over $130,000 if you are attending a private college and around $40,000 if you are going to a public school in your state.
This means that students are struggling to find creative ways to pay for their education and resigning themselves to graduating with a substantial amount of debt. So it is more important than ever for students to learn all that they can about paying for college and to start with a search to check student loans and the rules about repaying them.
Federal Student Loans Offer Many Repayment Options
If you have a federal student loan, you have several choices to consider when it comes time to begin making payment. The first is the standard plan which spreads your loan payments over ten years. There is also a plan called “PAYE”, which stands for pay as you earn. This plan uses your monthly income to calculate the amount of your monthly payments. Your payment is calculated as a percentage of your discretionary income. If you do not have any discretionary income at the time, then your payment might actually be zero until your income increases. As with any loan, the faster you complete the repayment process the less you will be paying in interest so the standard plan is the most cost effective if you can manage the monthly payments.
Options If You Can’t Make Payments
If for some reason you are unable to make your monthly payments, such as loss of a job or an illness, then you can apply to have your loan basically frozen in a deferral or forbearance program. In addition, you might want to explore switching to an income-based payment plan. The benefit of this is that your payments could be set at zero while you are unable to make payments and after 20- 25 years, depending on the program, the remaining balance of your loan is forgiven. So if you have a long term illness or situation that will take many years to resolve, then knowing that a portion of your debt will be forgiven could be helpful. The final benefit to this program is that even with a zero dollar payment due, you get credit for each on time payment of zero dollars so you are building good credit even though you are not actually making payments. That good credit history could be helpful later in life when you are applying for a loan.
Your School Misled You or Went Out of Business
If you attended one of the schools which recently went out of business and attended on money from a federal student loan, then you might be eligible for a complete discharge of your student loan. Not only does a discharge eliminate your balance without damaging your credit, but you would also be able to get back any money that you had already paid on that student loan. To be eligible for this discharge, you must have been enrolled at the school within 120 days of it closing and you have been unable to transfer your credits to another school. The discharge is also helpful if you have moved to a new school and are attempting to file for a new federal student loan.
Loan Forgiveness Plans for Teachers and Public Servants
There are forgiveness programs in place for teachers and other public servants. If you are a teacher, then you are eligible for student loan debt forgiveness up to $17,500. Public servants who qualify are members of the Peace Corps, Vista volunteers, police and corrections officers, child and family service workers, nurses and medical technicians, and members of the armed services. This benefit allows the student to eliminate any debt that is outstanding after ten years of repayments.
Private Student Loans vs. Federal Student Loans
Private student loans have fewer repayment options than federal student loans offer. In the case of a private student loan, the repayment terms are not federally regulated and are up to the lender to determine. This can also be important to remember after you have graduated and are considering consolidating your debt through a private lender. You could get a better interest rate through a private lender but you will lose your ability to make payments based on your income. You would also lose the ability to discharge any of your remaining loan balances through any of the previously mentioned forgiveness programs.
Help Is Available
Student loans and debt in general is a complex topic. There are many options for loans and repayment processes which can have a long term effect of your finances. But there are some very informative and reliable resources that can help you manage your student debt. The Department of Education website offers a feature that allows you to compare what your monthly payments would be based on several of the most popular repayment plans available. The National Consumer Law Center also has a site to assist borrowers.
Avoid a No Win Situation at All Costs
Not only are there many prepayment programs available but there are also many good resources that can offer you advice and counseling on repaying your student debt. Even if you are only able to pay a very small amount each month, it is critical that you continue to make the scheduled payments on time. The only no win situation is when you choose to give up and let your student loans go into default. The fees will begin to mount and you will find that your debt is growing and you have no way to avoid it. It is always best to check student loans information and understand your repayment options and payment schedule before agreeing to the loan terms. Because you might even ruin your credit for the rest of your life; student loan debt is often not forgiven as a part of filing bankruptcy. So never give up on yourself and continue to repay your student loans through any means you can. It is never worth throwing away your future to avoid repaying student loans.