Student loan debt is becoming one of the fastest growing sources of debt among young adults today. The struggling economy has yet to provide the influx of entry-level positions graduates were promised in exchange for getting their education. With few employment options and overwhelming student loan debt, many graduates have been forced to seek debt relief solutions such as bankruptcy.
Although bankruptcy can be a great tool for debt relief in the traditional sense, it does not usually provide the opportunity to eliminate this type of debt in the process. Student loan debt is one of the most challenging debts to have discharged in bankruptcy, but that does not mean that there are no other option available for debt relief.
Loan Deferment Program
One of the easiest ways to provide temporary relief from student loan payments is to request a deferment. A student loan deferment temporarily suspends payments for a period of 6 to 12 months. In most cases, the interest associated with the loan is also suspended during the deferment period.
Qualifying for a loan deferment is as easy as contacting the lender to request the deferment. Deferments are available for financial hardships, involuntary unemployment, returning to school or starting your own business. The most important aspect of qualifying for a deferment is that you are not delinquent on your payments. Therefore, you must contact your lender to request the deferment as soon as you become concerned you may miss a payment.
Loan Forbearance Program
Similar to a loan deferment program, a loan forbearance program can also suspend your payments for a period of time. A forbearance program is typically reserved for those who have defaulted on their payments and can prove financial hardship. Although a forbearance does suspend payments for up to one year, the interest on the loan will continue to accumulate during the forbearance period.
Qualifying for a loan forbearance can be easier than a deferment as the benefits are not as great. A forbearance program can grant payment suspension for medical problems, unforeseen personal or family problems and lack of income sufficient to cover the monthly payment, which is 20% of the borrowers total monthly expenses. Since defaulting on your loan does not hinder acceptance into a forbearance program, you simply need to contact your lender to request the necessary application for the program.
Loan Consolidation Program
Repaying your debts is always the best solution in order to protect your financial future. However, there are times when you can afford to make monthly payments on the loan but not over an extended period of time. Obtaining a debt settlement or consolidation plan can be a better option to bankruptcy, in that your credit will be better off having repaid the debt rather than have it eliminated. A loan consolidation can provide you with a reduced principal amount of debt owed. In other words, you may be able to negotiate a debt settlement with your lender and repay only this amount in full before your debts are considered satisfied. It is a good idea to attempt to negotiate with your lender directly rather than use a third party debt consolidation company.