Looking to Get Out of Paying Student Loans? Here’s How

Written by adminApril 23, 2019
Loans , Student Loan Consolidation

Many student loan borrowers find themselves stuck paying off their loans for years, even decades. There exist, however, standard and some more unorthodox ways to get out of paying your student loans.

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Enroll in a Federal Program

There are a number of federal programs that borrowers can enroll in to get reduced monthly payments, a deferment, or even loan forgiveness. Here are 5 different programs to help you pay off your student loans:

  1. Income-Driven Repayment – One of the more popular programs, IDRs help to lower monthly payments and after 20 to 25 years of payments, any remaining balance is forgiven. To request an IDR, you can fill out a form on studentloans.gov
  2. Deferment or Forbearance – Deferment is usually a last-ditch option for borrowers undergoing a financial hardship, granting a temporary respite from monthly payments. For some, forbearance could be another option for borrowers looking for a shorter payment pause. However this usually accrues interest on the loan during the forbearance period.
  3. Student Loan Repayment Assistance Programs (LRAPs) – For college graduates going into public-oriented careers, applying for a LRAP could result in a portion of their loans being forgiven. LRAPs are usually awarded based on an applicant’s income in comparison to their total debt amount.
  4. Closed School Discharge – To qualify for a closed school discharge, one must be enrolled in a program when the school closes or have been enrolled in the previous 120 days.
  5. Total and Permanent Disability (TPD) – If by some circumstance a borrower becomes disabled and unable to make student loan payments, they might qualify for a full loan discharge.

More Methods to Get Out of Paying Student Loans

If you don’t like any of the above methods, perhaps you will consider these decidedly more creative ways to get out of paying your student loans:

  1. Relocate to a different state – Certain states like Kansas offer incentives for out-of-state transplants. Kansas’ Rural Opportunity Zones program offers waivers of student loans of up to $15,000 over five years. Similar programs include the Opportunity Maine Tax Credit and the Hamilton Ohio Foundation.
  2. Talk to Cosigner – A Cosigner will be responsible for the debt once a borrower fails to make payments, so it will be in their best interest to help cover loan payments until the borrower is financially solvent.
  3. Employer Student Loan Benefits – The IRS recently ruled that employers could offer student loan payment matching in concert with existing 401(k) plans. This is still relatively new but could prove prevalent in the future.

The Bottom Line

Once a student loan has been taken out, the debt has to be repaid. Hopefully the suggestions above can help borrowers steer clear of default and protect their credit. And as always, the Financial Helpers are only a phone call away.

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How to Avoid Student Loan Default

Written by adminApril 22, 2019
Credit & Debt , Loans

Learn to steer clear of default, your wallet will thank you.

Loan default is somewhere you don’t want to be, and for the borrower just out of school this financial mistake could come with significant costs. John Heath, credit expert and directing attorney at credit repair firm Lexington Law, suggests taking a deferment or forbearance period.

“These alternatives permit you to temporarily stop making payments or reduce your monthly payments,” Heath says could give some breathing space. But borrowers shouldn’t forget that interest continues to accrue while student loans are in forbearance.

Another solution will be to consider switching to an income dependent repayment plan if you don’t want to put your student loan payments on hold. An income repayment plan could make monthly payments more manageable as well.

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It may also be worthwhile to ask your lender to provide a grace period in the event of a difficult financial situation, for example an unforeseen job loss or illness. The flip side is that a payment plan extends the repayment period which means higher interest charges. But that’s a better option than defaulting.


What to Do If You’ve Already Defaulted on a Loan

If you’ve already defaulted on a loan, here are some tips for damage control:

  1. Pay the late amount – This will help you avoid any more negative impact on your credit score, any additional interest, and late fees.
  2. Get a new payment plan – Call your lender to discuss restructuring your payment plan so you can catch up.
  3. Contact special programs to get out of default – For federal student loans, consider loan rehabilitation in the short term.
  4. Negotiate a settlement – If you’ve been in default for an extended period of time, your lender may contact you to accept a settlement for less than what you owe.
  5. Check your credit reports and scores – Stay up to date with your credit score as you make your payments or if you settle a defaulted loan. Ensure that your payments are reported accordingly.

The most important tip though, would be to avoid doing nothing. Creditors prefer borrowers to take the initiative when it comes to their defaulted loans. If you have any other queries, the Financial Helpers are just a call away.

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The Impact of Defaulting on a Loan

Written by adminApril 19, 2019
Credit & Debt , Loans , Personal Loans , Student Loan Consolidation

Defaulting on a loan can be detrimental in more ways than one.

You may have applied for a loan with the intention to pay it back in full, but sometimes unforeseen circumstances may throw you off schedule. Missing one payment and then a few more could result in you defaulting on your loan.

If you currently have a loan in repayment, understanding the risks of default can help in creating an action plan to avoid it.

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Loan Default & Your Credit Score

35% of your FICO score is dependent on your payment history. CardGuru COO Dan Soschin states,”Even a few late payments can negatively impact your credit score.”

Just one late payment could decrease a score by 100 points or more, and the negative marks could remain on your credit report up to seven years from the delinquency date. This could result in higher interest rates on loans and lines of credit taken out in the interim, which in turn means a higher overall cost of borrowing.

John Heath, credit expert and directing attorney at credit repair firm Lexington Law, says that the negative effects of defaulting on a loan do not stop at just your credit score. They can also prevent a borrower from getting new credit, buying a new cellphone, or even apply for a job.

According to a 2017 survey conducted by CareerBuilder, a whopping 72% of employers said they perform background checks on applicants. This could constitute a credit check too, and a low credit score could dissuade employers from offering a position especially if it’s financially sensitive.


Other Impacts of Loan Default

The negative impact on a credit score may be worrisome, but that’s not the only thing you have to be aware of when in loan default.

You could be put in collections, which means calls and letters coming in demanding payment, or even lawsuits of these demands go unanswered.

Creditors could also take further action by repossessing your assets, such as vehicles in the case of an auto loan default or initiate foreclosure on your property if you default on your mortgage.

In case of a loan default where there is no collateral, creditors could come after you by garnishing your wages or put a levy against your bank account. In the event of a federal student loan default, your federal income tax refund could be taken too.

If you are in danger of defaulting on your loan, it might be time to start taking your financial decisions seriously. And as always, the Financial Helpers are readily available to assist you.

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