Once you’ve finished studying, your student loan payments begin, and you may find yourself in economic trouble. There is no financial aid for paying back student loans, so what can you do to make your payments?
While there is no financial aid available for student loan payments, the government and private lenders can help accommodate your loan payment in other ways.
There are ways to hold off on consolidating your student loans if you’re having temporary financial problems. Payment of Stafford student loans can be deferred, as can some private loans, and you can also forbear payment at the lender’s discretion. Deferments are granted if you decide to keep studying, if you are unemployed, or due to economic hardship.
Deferment allows you to pay just the interest on your loan, or pay nothing during the deferment period and add the interest to the capital, later paying interest on an amount which includes the interest accumulated. If you have a need-based subsidized federal loan, if your financial situation allows you to defer your loan you will not have to pay interest. This is similar to a form of financial aid during the loan repayment period.
Forbearance of a loan generally gives you a twelve-month respite in loan payment during which interest will always accumulate. Lenders will only allow forbearance in extreme cases, if ever.
The consequences of defaulting on a student loan can include money being taken directly from your paycheck, tax returns being withheld, and you will be ineligible for further financial aid or certain social security services. If you have a professional license, it can be suspended until payments are met or revoked.
Before defaulting on a loan, consider consolidation. Private lenders and the Department of Education offer consolidation loans to extend your payment plan and lower your monthly expenses.
Consolidation is a good way to reduce your current financial burden due to student loan debts, and consolidation gives you access to different payment plans. You can switch between these plans to meet your financial needs.
Consolidated loans will generally have a higher total payment, but it will be spread over time with low monthly payments for up to about 30 years. You can opt for a shorter-term plan with higher monthly payments if your financial situation permits. Graduated plans offer lower payments now and periodic payment increases, giving you a chance to change your economic situation.
Income-based plans allow you to pay off your debt as you can; your income, household size, and expenses are taken into account when determining your payment. If you are below the poverty line, you do not have to pay. This is the only way to end up paying less than your overall loan in the end, but the downside is that you will have to make up for lost time with a certain percentage of your income if your financial situation ever improves.
Private lenders and the Department of Education do what they can to make it possible to pay back your student loans, although financial aid for paying back student loans does not exist.
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