Student loan debt: if you have it, you know just how much of a drag it can be. Unfortunately, student loan debt is so prevalent. Today, the cost of tuition is rising at about triple the rate of inflation at many universities across the country. Because of this, many graduates are wondering about debt relief and how it can tie into their student loan picture.
These waters can be murky, though. What is the connection between debt relief and student loans? How do the two work together? Here’s what you need to know:
Student Loans and Debt Relief
Many student loan borrowers are surprised to learn that the answer to their debt relief prayers might be sitting right in front of them. In fact, they may already be participating with it. It’s called “Income Driven Student Loan Repayment.” Under these plans, offered by Federal Student Loan Lenders, a student makes a payment based on how much they earn each year.
If the student’s income is too low and the borrower cannot afford to make payments, the Government will reduce monthly payments back to a manageable amount. If, after about 20 or 25 years, the debt load is still too high (but the student has made on-time payments consistently) the debt load is forgiven.
While many people don’t associate these plans with debt relief, they work the same way. Debt relief happens when a lender accommodates a borrower’s financial reality. Typically, debt relief plans lower or forgive a portion of the debt to make it more manageable for a borrower. This is what the Government is attempting to offer through income-driven loan repayment.
Programs for Student Debt Relief
When it comes to student loan repayment, the Government doesn’t alter old plans as frequently as it creates new ones. Two of the newest are Pay as You Earn (PAYE) and Revised Pay as You Earn (REPAYE). Here are the differences between each, according to Debt.org:
- You need to show “financial hardship” which simply means that the payments under the income-driven repayment plans will be lower than what you would have to pay on the 10-Year Standard Plan.
- You must also be a new borrower as of October 1, 2007, to enroll in PAYE, but there is no new borrower condition to enroll in REPAYE.
- You need to have received a loan distribution as of October 1, 2011, or else you’ll need to consolidate your loans into a Direct Consolidation Loan to be eligible.
Additionally, you may have some loan forgiveness options based on your career path of choice. People in the “helping professions” (therapy and medicine, for example) may be able to get a portion of their loans paid back by agreeing to work in an underserved community. If you want to learn more about your student loan debt relief options, talk to your lender or a certified debt relief organization.
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Meta: If you have questions about student loan debt relief, you’re not alone. Learn more about the situation and what you can expect here.