Student Loans

Finding Solutions to Student Loan Repayment Problems

According to Senator Lamar Alexander (R-Tennessee), a massive overhaul of the student loan system is on the table because – according to the senator – the $1.4 trillion in outstanding debt is not the problem, but those who are struggling to repay them that are the issue. So, the senator wants to alleviate all those issues and simplify the whole process by automatically garnishing their paychecks! Gather around and hear how the senator wants to “help” burdened grads repay their loans – by having 10 percent of their discretionary income or payments spread over a decade deducted directly from payroll by their employers.

The Gap

What the good senator and his party seem prepared to ignore is that the overwhelming defaulters in student debt are not evenly distributed. The Brookings Institute has some very stark numbers on student loan repayment problems including defaults within twelve years of entering school.

  • 52% of defaulted loans belong to students who attended for-profit colleges.
  • 26% of defaulted loans belong to students who attended public two-year colleges.
  • 19% of defaulted loans belong to students who attended private nonprofit four-year colleges
  • 18% of defaulted loans belong to students who attended public four-year colleges.

Something is seriously wrong with the way that postsecondary education and student loans are being sold to nontraditional students, and even to students who aspire to a four-year degree from a state university. Despite companies getting on board with helping employees out with their loans as a perk, too many enter the workforce without a way to pay their loans and afford the basics of food, shelter, and transportation without a lot of belt-tightening or without skimping.

Are You Having Student Loan Repayment Problems?

  • Wages are rising and grads are gradually moving up the career ladder, but with every day costs of living, medical bills, and other expenses it can be difficult to keep up with loan payments. It pays to study your options for consolidation, deferment, forbearance, or even for a hardship discharge. None of these are easy, and all of them will take time, so let’s cover all the options right here.
  • Deferment: Deferments are postponements to making payments on unconsolidated student loans that must be renewed every year for up to three years. Depending on your type of loan, interest may accrue to balance. Types of deferments include graduate fellowship, in school, rehabilitation training programs, unemployment deferments, economic hardship deferments, and military service deferments.
  • Forbearance: forbearance is another way to temporarily postpone making monthly payments. However, when in forbearance, all loans no matter of what origin accrue interest to balance. Forbearance must be renewed at the end of each year for a maximum of three years. In some cases, forbearance is mandatory such as when payments take up more than 20% of monthly income, when in a medical internship or residency, or as a member of the National Guard who has been activated to duty. Your loan servicer may not deny you a forbearance if you are eligible.
  • Fraudulent Loans: Unfortunately, this form of identity theft is on the rise. Nobody checks out the creditworthiness of students entering college, it is assumed that they have no credit. This makes it easy for scammers to steal information and fraudulently obtain loans which are then defaulted on, and returned to the unknowing student for collection. Sometimes, this is a crime of familiarity, perpetrated by those who have access to the student’s information such as Social Security numbers, birth certificates, and school records.
  • Fraudulent School Discharge: This is also called borrower defense to repayment. Those who attended shuttered schools did not receive the full value for their loans and are eligible for debt relief. This is especially true when the school misled students and violated state or federal laws.
  • Forgiveness: There is an extensive list of student loan forgiveness programs that will allow you to pay back some of your loans before forgiveness kicks in, others that are targeted to teachers, nurses, doctors, lawyers, and other career choices. Other forgiveness is for military personnel, and there is even forgiveness for special circumstances. Make sure to investigate every program for which you may be eligible.
  • Consolidation and Refinance: There are a number of entities offering consolidation for both federal and private student loans. Consolidation combines multiple federal loans into a single federal loan while refinancing combines multiple loans into a private loan.
  • Grants: Grants are typically geared to students seeking postgraduate work in specific areas of research, or who have served in the military, or entering work in health-oriented fields.
  • State Assistance Programs: Depending on your state of residence, students may be able to pick and choose between zero and 10 state directed loan forgiveness programs.
  • Employer Repayment and Tuition Assistance: Employers seeking to recruit Millennials and Gen Z workers have a terrific new perk in their arsenals. Paying off existing student loans over the course of a career, and providing tuition assistance go long way to attracting talent and encouraging them to remain on the job instead of seeking advancement elsewhere.
  • Bankruptcy: It is possible to discharge student loans in a personal bankruptcy if you can prove undue hardship. Specifically, the court may seek to verify undue hardship via the Brunner Test. This test has three key points including the effort expended to keep up with payments prior to bankruptcy, the permanence of financial difficulties, and ability to maintain a minimal standard of living in order to repay the loan.
  • Snow Method: This method is detailed in our blog. Snowflake, snowball, and avalanche methods are very good at either blasting away massive chunks of debt, small victories, and saving a pocket change.
  • Plastic Fantastic Method: balance transfer credit cards can be used to pay student loans. But the question is, should you do this? Unless you can pay off the balance within the term – say 18 months – you could find yourself saddled with a maxed-out credit card and a high-interest rate.
  • Tax Credits and Refunds: Take advantage of tax credits such as the American opportunity credit, the lifetime learning credit, the Coverdell education savings account credit, 529 plan credits, student loan interest deductions, and even no penalty withdrawals from a qualified IRA.

As you can see, there are numerous ways for students to knock down your balances, save money, and get on top of student loan repayment problems. Combining different approaches or finding the one that works the best for you can blast that balance! You may need to get some astute financial advice before embarking on a course of action, just to make sure that it is sustainable and realistic.

Beware of Scammers!

It’s hard to have your back up against the wall with student loan repayment problems. It’s terrifying not to be able to afford to make your loan payments and meet basic needs at the same time. Unfortunately, this is the emotional stress that scammers count on to make you vulnerable and weave in what they’re selling. Forbes points out three of the most popular scams running this year. Including loan forgiveness scams, tax credit scams, and consolidation scams. The reason that these email and phone scams are so successful is that they are based in fact. Here are the red flags to watch out for when it comes to student loan scammers.

  • They all want an upfront fee for their services or immediate payment of “fines” or “tax debts.”
  • They claim to have a special relationship with the DOE, the IRS, or other government agencies.
  • They do not have a phone number that matches up with their claims – search the number on caller ID and also the callback number they give you to respond.
  • They do not give a company name and location or website.
  • They claim that you will be arrested or sued if you do not comply with demands for payment, or they pressure you to pay that upfront fee right now.
  • They demand payment by strange methods such as Western Union, iTunes, or bank transfer.

Keep your head, note down all the information you possibly can, and report the scammers to the appropriate federal and state authorities. Don’t be the victim of a scammer just because you are desperate to knock out those loans and get your life back. If anything, panicking and jumping into the first solution you see is a recipe for even more trouble in sleepless nights. Talk to professionals that you can trust and that have a good reputation.

We Can Help!

At Van Horn Law Group, we don’t shy away from the messy, tough, and frustrating cases. We have the experience that you need to help you get your student loan debt and other forms of debt under control. Don’t live your life servicing debt. Come see us in Fort Lauderdale or West Palm Beach where our offices are open Monday through Saturday, and by appointment on Sunday. We have experienced staff and attorneys will treat you with respect and compassion. Call us today and let’s get started on telling your student loan repayment problems goodbye.

Article Name
Finding Solutions to Student Loan Repayment Problems
There are numerous ways for students to knock down your balances, save money, and get on top of student loan repayment problems.
Chad Van Horn
Van Horn Law Group
Van Horn Law Group
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Chad Van Horn

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