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Struggling with student loan debt can be one of the most stressful situations to be in for someone after college. Especially in today’s economy, it is difficult to find a job that will lead to an actual successful career right out of college. Because of this, it is taking longer and longer for people to find themselves in a comfortable enough place, financially to be able to easily maintain the payments.
The direct effect of this is that defaults on student loans are higher than they have been since 2000. Defaulting on a student loan wreaks havoc on more than just someone’s credit, but also on their personal lives. Defaulted loans are forwarded to collection, and the phone calls begin. Further down the line, these collections are taken to court and become judgments. With the judgments comes the wage garnishment, which can make every part of living hard, especially for someone new to the workforce who has not yet found a stable career.
The issue at the center of this is the question of payment deferment. Each borrower is only allowed limited time to defer the payments. After that, the only option is to obtain forbearance, which is not available to everyone. These, coupled with the fact that a borrower cannot include Federal student loan in a bankruptcy, leave borrowers with very few options.
At the height of the lending boom a few years ago, the options for student loan consolidation were quite numerous. Private lenders were able to take over the debt and still receive the protections that come along with holding a federal debt. New student loan lenders popped up every day. However, with the cash of the mortgage market came the crash of most financial markets, including the private school loan consolidation market. Even the Federal Perkins Loan consolidation was scaled back in the wake of the financial crisis.
This has left borrowers in a crisis. The options that were once there have, for the most part, gone the way of the dodo. Nevertheless, there are still options.
A loan consolidation can typically not occur if the student loan is already in default and with a collection agency. But, it is extremely difficult to get a student loan out of default status, especially if it has already made to collections or to a judgment. There is someone there to help, though.
Each state has an appointed position called a student aide ombudsman. The job of this position is to fight for the rights of borrowers. They will help to get a borrower’s loan out of default status so that the borrower can go through with a student loan debt consolidation and start making regular payments.
For someone struggling with student loan debt, things are difficult. In addition, while there are not as many options as there once were, there is still a way out of the hole.
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