Alternatives to Student Loan Default

What to Do when Student Loan Debt is Too Much

Are you struggling to maintain student loan debt repayments? Find out why it is important to avoid student loan default and what strategies are available to counter this.

Student loan default is legally considered to have taken place when non-payment has persisted for a period of not less than 270 days. This not only has implications for the borrower's credit rating, it also means that it will no longer be possible to defer student loan repayments in the future. College debt cannot normally be cleared by filing for bankruptcy (other than in exceptional circumstances) so it is important to tackle student loan debt appropriately before financial difficulties spiral out of control.

Student Loan Default Alternatives

As already alluded to, defaulting on a student loan is not a panacea and will not make the borrower's money worries go away. The only long term solution tostudent loan debtis a viable repayment plan. However, rather than opting to default on a loan, there are delay tactics and programs that can help. It is also possible to make a few simple lifestyle changes that can free up money to help with overall debt reduction and clearance.

Defer Student Loan Repayments

Should a college graduate be unable to maintain repayments due to financial difficulties and/or problems finding work, it may be possible todefer student loansfor up to three years. Whilst this provides time to get one's life back in some sort of order, interest will normally continue to accrue. The exception to this rule is subsidised federal loans. In this instance, the government is prepared to forego interest payments in order to help those in greatest financial need. Sadly, this won't apply for the majority of individuals.

Student Loan Forgiveness Programs

Public sector occupations, including nursing, the armed forces and teaching, may result in a set percentage of student loan debt being cleared for each year of service. This is due to a realisation that the most important community positions don't necessarily yield the highest salaries.Student loan forgiveness programseliminate debt in a fraction of the normal timeframe without the need for default.

Avoid

Student Loan Default By Living with Family

The cost of renting an apartment is considerable so eliminating this expense and other associated household bills could increase disposable income substantially. Living with parents for a period of two to three years could free up sufficient money to completely clear college loan debt. This could prove an invaluable strategy for those who aren't eligible for a student loan forgiveness program or have a high percentage of private student loans. Remember that it is better to defer student loan repayments rather than default.

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