Have you been falling behind on your student loan repayments and worried that the Department of Education is going to take your tax refund, garnish your wages or sue you? Bankruptcy wonÔøΩt eliminate your student loans, because of recent changes in the law. But learning about your alternatives and taking action can defuse the problem before any damage is done to your credit ratings or bank account.
Your first concern needs to be in making sure that your loan isn’t in what’s called “default,” usually defined as not making a payment or attempting to renegotiate payments within the last 180 days. For anyone who is in default, your lender is often rather unlikely to renegotiate your loan. However you can ask your lender to ascertain a “reasonable” repayment schedule, influenced by info you supply for example monthly income, other debts, dependents and the like. Once you have made payments as agreed for six months, you might then be entitled to new loan.
Deferment of Loans
If you ever aren’t in default, you may be able to get your student loans “deferred,” which implies repayment is going to be delayed if you:
- Are permanently or temporarily totally disabled
- Are completely unemployed
- Have a federal loan and can prove that you are suffering an economic hardship (as defined by the lender)
- Are enrolled in school
- Are in the military fulltime
- Are providing medical care in a poor area or to the needy
You’ll have to fill in paperwork from the lender and follow through to ensure it’s processed correctly. With some loans, the interest for the loan will continue to build.
Forbearance
If you do not qualify for a deferment, you might be able to postpone your student loan repayments during a specific period of time through what’s called “forbearance.” It’s easier to get a forbearancethan a deferment, but you’ll carry on and rack up interest even during the forbearance period.
Canceling Your Loan
You can probably request that your lender cancel your student loan entirely if you:
- Are permanently or temporarily totally disabled
- Are in the military fulltime
- Are teaching in a poor area or to needy students
- Are providing medical care in a poor area or to the needy
- Are providing certain types of community service, such as serving in the Peace Corps
- Are working in law enforcement, with certain loans
- Withdrew from school or the school closed before you could complete your degree and you did not receive a refund
Renegotiating or Refinancing
When you aren’t in default, and do not qualify for deferment, forbearance or cancellation, you’ll probably still have the capacity to renegotiate a whole new repayment plan that’s doable with your current financial circumstances. Any time you extend the time for repaying your loan, you’ll find yourself paying more interest. Types of repayment plans include:
- Graduated repayment, with payments that start out lower and increase every few years. If you expect increases in income over time, this makes sense.
- Extended repayment, with a fixed monthly amount that goes longer than the period of your current loan (some as long as 30 years)
- “Income-sensitive repayment,” which fluctuates with your income (usually measured annually)
Consolidation
You could possibly consolidate all your student loans together at the renegotiated rate. You will likely find yourself paying more interest if your loan period is extended, but you may perhaps be eligible for a lesser interest rate to balance it out. Most consolidation lenders won’t consolidate student education loans that total less than $7,500.
In the event you go with a consolidation loan, you’ll want to make sure you can accelerate payments without a penalty, in case your financial situation improves over time.
For anyone who is having difficulty making your student loan repayments, it’s most important to act quickly, before you’re in default and you’ve damaged your credit history. The sooner you educate yourself on your options and take action, the better.
For help with a Macon GA chapter 7 bankruptcy, call a Macon Georgia bankruptcy law firm. A Macon Georgia bankruptcy law firm could give you the help you need.