Student Debt Recovery

Getting a college degree is a wonderful thing that can open a thousand doors that would otherwise be closed. Unfortunately, it can also lead to the accumulation of burdensome debt in the form of student loans. These debts can become overwhelming in many instances, leading many students to seek outside help.

Deferment

If you're facing a student loan that is getting ready to go into default because you aren't making enough money to pay it down, there are several options available to you. This is especially true of federal loans. One option includes applying for an economic hardship deferment. If you are accepted into the plan, the monthly payments on the loan can be suspended for some time. The downside is that while you won't have to make these payments, the interest will continue to accrue.

Restructure

Deferment plans are good if you know that there is a specific point in the future where you will be more financially capable of paying off the loan. If this isn't the case, you may want to get with the lending institution and work out a long-term alternative payment plan. This could include extending the life of the loan while reducing the monthly payments. While this may be the best choice to avoid default, it will increase the total amount of interest you pay on the loan substantially.

Consolidation

Many students these days are getting much of their funds from private loan agencies. Private loans can be consolidated if they come from more than one institution. Many times, this consolidation can lead to a better interest rate and an easier way to handle the monthly payment. Your interest rate could also be improved if your credit score has improved since the time you originally took out the loan.

Warning

It is important to do anything you can to keep in contact with your lending institution, whether it is the federal government or a private loan agency. Letting a loan go into default can have disastrous consequences for your financial stability. With federal loans, if 270 days pass without a payment, the government has the legal right to begin garnishing your wages. With private loans, you could be sued for the full amount after only a 30-day grace period. Even bankruptcy will often not be enough to get rid of a student loan.

Prevention/Solution

There is no better way to stay out of debt recovery than to make good choices early. If you're still in college, now is the time to take advantage of any possible funds that can keep you from swimming in debt later on. Make sure and fill out the FAFSA form, which will let you apply for grant money from the state and federal government. Check your school for any potential scholarship opportunities. Don't sink yourself in loans if you know your career opportunities aren't going to bring in enough income to stay on top of the regular future payments.