Federal Student Debt Relief: What Are My Options? 🤷♀️🤷♂️
If you’re reading this, you’re likely one of the 44 million Americans who graduated college with college debt. You aren’t alone in looking for federal student debt relief, that’s the good news. The bad news is that colleges are showing no signs of reining in costs. Total unpaid student debt in America hit a record $1.5 trillion last year and 25% of student borrowers owe at least $43,000 or more. New college students are unfortunately still feeling the wrath of the 2008 financial meltdown. Private lenders are overly cautious and federal interest rates are now as high as 7%. With so much debt, how can a college graduate in an entry-level job afford anything?
Don’t worry, it isn’t all bad news, especially if you have federal loans. Federal loans come with a host of benefits over private ones and the government is a much more forgiving lender than banks and financial institutions. Depending on your situation, you could qualify for a number of federal student debt relief options, including total forgiveness. These are life-changing programs, but 95% of borrowers aren’t even aware they exist. If your student debt stress is unbearable, here are a few ideas to get you started.
The federal government has four different offers to reduce your debt burden if you don’t have the wages to make payments. With income-driven and pay-as-you-go plans, graduates can reduce their payments to 10-20% of their monthly income. By reducing the monthly payment, the duration of the loan increases to 20-25 years and different restrictions apply depending on the type of loan you have. If you’re starting a family or stuck in a low-paying job, a repayment plan based on your salary might be a good alternative.
Burdened with multiple loans from different providers? Direct consolidation loans can simplify your life by combining your loans into one with a lower monthly rate. If you have two loans worth $20,000 each and pay two different monthly bills of $300, consolidating those loans could reduce your monthly balance to one $500 payment. Consolidation loans have a fixed interest rate based on the average of the rates of the combining loans. Like income-based repayment plans, this increases the life of the loan and will add to the total amount of interest paid. Borrowers under income-based repayment plans may not be eligible for consolidation.
Student Loan Forgiveness
Here’s the best news of all – your loans may be forgiven or dispersed under certain circumstances. The federal government offers protections in case your school closes or makes false claims, or if you become permanently disabled. Furthermore, certain professions may also be eligible for total loan forgiveness if they make 120 consecutive payments and work for a public service or non-profit employer. Teachers, military personnel, and other non-profit workers can take advantage of these programs and have their loans completely erased.
Student loans are an incredible strain on new graduates, but federal student debt relief is available for those in need. Income-based repayment and consolidation can drastically reduce monthly bills and forgiveness can open up a world of new opportunities. Don’t let student loan debt cripple your financial future. Over at LoanGifting, you can find out which programs you’re eligible for through a free federal benefit analysis. Through a partnership with GotZoom, they’re dedicated to saving you money and making student debt workable.
Dan graduated from college with a degree in journalism and about $25,000 in student debt. He luckily landed in a career that allowed him to pay his loans off at a reasonable rate, but not without making some sacrifices (sorry grandmom). Dan buried himself in personal finance books to better manage his debt and start saving for retirement. He thinks $25,000 is more than enough to pay for a good education and is stunned by some of the near six-figure balances he sees student borrowers carrying around.
Born 45 minutes north of Philadelphia, Dan went to Penn State in 2004 to pursue a journalism degree with a minor in political science. He graduated into the worst recession in 80 years and got his first post-college job serving hamburgers and Miller Lite. Dan eventually settled in as a purchasing agent at a printer manufacturing company, which isn’t a profession you’d think would be #2 on a journalist’s list.
Dan now lives in Doylestown, PA with his girlfriend, who herself graduated with over $80,000 in student debt after getting an education degree from Arcadia University. Seeing a new teacher forced to pay nearly $1000 a month in loans drove him to action and LoanGifting gave him a platform to not only help his significant other, but all kinds of borrowers struggling with student debt. Dan’s hobbies include Texas Hold ‘Em, making friends with dogs, and watching the Eagles’ Super Bowl win on DVR twice a week.