Defaulting on student loans is a bigger problem than federal
government data suggest, according to
The Chronicle of Higher Education
article published July 11
reports that the government vastly undercounts the number of
borrowers who fail to pay back their student debt.
The last thing you want to do is default on your loans, which
will hurt your credit score, make you ineligible for future federal
student loans and may prompt the government to seize your wages
(when you get a job) and tax refunds. Instead, explore the various
loan-deferment and forgiveness programs.
You'll have more options if you have a federal student loan.
You're entitled to a
(temporary suspendions of payments) if you can't find a full-time
job or experience economic hardship. FinAid.org has a
to help determine whether you'll qualify for deferment.
If you're not earning enough to keep up with your student-loan
payments, you may qualify for the relatively new
(IBR) plan. The plan, which was introduced in July 2009, reduces
the monthly payments for borrowers with high federal studen-loan
debt relative to income. You pay nothing at all if your income is
less than 150% of the poverty level. To qualify, you must have a
Stafford, Grad PLUS or consolidation loan and your new monthly
payments must be lower than the amount you would pay under a
standard ten-year repayment plan for these loans. Visit
Student Aid on the Web
for more information about eligibility, monthly payment amounts for
a range of incomes and a calculator that will help you determine
whether you'll benefit from the program.
You might qualify for federal
if you work in a public-service job, work in an underserved area or
work at a national service organization, such as AmeriCorps. See
How to Shed Student Debt
for more information about these options.
If you have private student loans, speak to your lender about
stretching out the loan term to lower your monthly payments. You'll
pay more interest over the long term, but it will help now while
you're struggling to make ends meet. Or shop around for the best
terms you can find on a private-loan consolidation (compare
). Consolidating also lets you stretch out the term of the loan,
which may lower your monthly payments.
me on Twitter
. Log on to Twitter at 8 p.m. ET July 21, when I'll be answering
questions about saving for college during a #dealchat hosted by
Natalie P. McNeal, of TheFrugalista.com. Type #dealchat in the
Twitter search field to follow the conversation.