The US President Barrack Obama has recently declared that he will make use of his executive powers to ensure that student loans become less of a burden for the borrowers. This measure is particularly aimed at helping out older borrowers, so that they can manage their debts. Another piece of news to hit the student debt landscape is that these loans are now becoming more of the students’ responsibility than their parents. As per a survey conducted by Discover student loan, only 52% of the parents had claimed that they were ready to help their children with these debt repayments as against 58% last year. This particular observation has come quite as a surprise amidst news of outstanding student loan debt had hit a whopping $1.08 trillion in the year 2013.
However, while we can’t really gauge the reason why more and more parents are refusing to help their kids with their loans we can definitely provide you a rundown of the debt repayment options that you have.
There are times when aggrieved borrowers with too many loans turn to companies, providing debt consolidation of federal loans. Now, debt consolidation might be a favorable option if you are paying up lesser rate of interest on the umbrella loan than the total interest that you were paying for all your previous loans. If you are not paying your installments on time, then even debt consolidation loans lead to serious consequences. Consolidation services are generally availed by borrowers, who find it difficult to deal with their present debts. There are various other alternatives to consider before consolidation.
What are your Repayment Options?
Besides, standard repayment, there are various other options which you can consider while dealing with student debts. Let’s delve in to relevant details:
Most of the standard schemes entail a payment of $50 per month for 10 to 30 years. It turns out to be the easiest and fastest way of getting rid of your debt. So, it’s advisable that you opt for it, if you can afford the same.
The Income based Repayment or IBR gives you the option to limit your repayment to 15% of your discretionary earning each month. However, this plan is only applicable on Stafford, PLUS (for graduate students not parents), and Direct Loans. The repayment under this plan would be lesser than that under the standard plan. However, you can only qualify only when you are able to furnish proof of financial hardship (at least partial).The discretionary income, mentioned above, is the difference between your Adjusted Gross Income and 150 percent of the poverty policy applicable on the size of your household in your own state. “The Pay As you Earn” is a modified version of the IBR plan whereby you are enabled to limit your repayment to 10% of your discretionary income.
There is also an option to qualify for Public service loan forgiveness. If you have already registered in the IBR or the The Pay As you Earn program and are employed in a nonprofit or public sector then your debt can be forgiven after around 10 years.