Did you know that approximately 40 million students in the US are currently in debt? And out of these 40 million, at least 7 million defaulted? These figures reflect the ever-growing student debt crisis in the United States. With debt statistics worsening, the economy is at serious risk of facing a financial breakdown similar to that of in 2008. While a few students graduate and celebrate their achievements, looking forward to a bright career, a majority of students begin their struggle to pay off student loans. Without a degree, you can’t really find a job, and without a job, you can’t pay off your loan. So it all boils down to “preventing higher education from being so unaffordable
Education produces a skilled workforce and pushes our society towards success. Without a college education, unemployment is bound to rise. Many families send their children to college to help them prepare for a better future and become a more productive part of the community. However, getting through college will require some sort of financial help. A majority of students opt for federal student loans, grants, and scholarships to fund their dream of graduating from a prestigious university. Loans offered through federal resources are easier to obtain and are need-based. Some of the most commonly available federal student loans include the Perkins Loans and the PLUS loan. All students have to do is fill out a FAFSA form online, free of cost.
However, the federal government and a number of private banking institutions have developed various loan forgiveness programs and debt consolidation programs. Such efforts are geared towards lowering the debt percentage and reduce relieve financial burden off students.
Student Loan Debt Consolidation
Debt consolidation programs are basically designed for students who have taken out more than one loan and are having difficulty paying them off. For students who have taken out more than one federal student loan, qualifying for a federal loan consolidation program may be a possibility.
There are a number of reasons for opting for a consolidation program. Managing multiple loan repayments with different interest rates can be a hassle, and also expensive. By consolidating a loan, students can have all their monthly payments combined into one single payment, with one defined interest rate. The repayments are stretched over a period of 30 years, making the payments more manageable and of course, affordable. However, it is important to first determine how much one is currently paying and whether consolidation will be feasible or not.Listed below are the main features of a consolidation program:
- Single monthly payment
- Fixed interest rate
- Extended repayment period
- Affordability and convenience
Debt consolidation for bad credit is a reasonable way to manage your loan repayments. This is recommended to individuals who are at risk of defaulting on their student loans. Here are some of the main loans that can be consolidated through a federal program:
- Federal Perkins loan
- Direct subsidized loans
- Direct unsubsidized loans
- Direct PLUS loans
- Subsidized Stafford loans
- Unsubsidized Stafford loans
- Federal nursing loans
The interest rate of consolidated loans is based on the weighted average of all the interest rates of the loans and rounded off to the nearest one-eighth of 1%.
College Debt Forgiveness Programs
Apart from consolidation programs, students can also try getting their loans annulled through forgiveness programs. The federal aid office has designed various forgiveness programs each with a distinct set of eligibility requirements.
Here are a few:
Public Service Loan Forgiveness PSLF
This program is designed to encourage individuals to join the public service sector. By working in public service, students may qualify for loan forgiveness. This means that after paying a minimum number of loan repayments, the remaining amount of the loan is cancelled. Here are the main features of the program:
- A minimum of 120 payments must be completed on time
- These payments must be made under a repayment plan
- Individuals must be working with a public service organization
However, not all federal loans are eligible for forgiveness. Students can opt for PSLF if they have taken loans under the William D. Ford federal direct loan program.
Teacher Loan Forgiveness Program
In this program, individuals who are currently working as teachers and are paying off their student loans can qualify for loan forgiveness. This program encourages individuals to pursue careers as educators and service firms. Up to $17,000 can be forgiven on a loan. The basic eligibility requirements are:
- Must be working as a teacher
- Must not have any outstanding balance on direct or federal family education loan
- Must not be in default on any loan (subsidized and unsubsidized)
- Must complete 5 full-time years of teaching service
Total and permanent disability discharge TPD
Students who are suffering from a permanent disability can seek loan forgiveness through this specific program. The agency will examine the extent of your disability and determine your eligibility. Here are the three main eligibility requirements:
- Unemployable veteran who has suffered from a service-connected disability
- An individual who is receiving social security disability insurance, or supplemental security income benefits.
- An individual who can prove his or her disability by obtaining a certification from a physician
Why Consolidate Student Loan Debt?
There are a number of benefits that come with consolidating a student loan. Students no longer have to worry about making those multiple monthly repayments and figuring out the interest rate for each. With consolidation, all loans are combined into one and consolidated into a single monthly repayment.
There are also a number of private companies and banking institutions that are offering consolidating programs. This option is available for individuals who have taken out private student loans. It is important to remember that private loans cannot be consolidated under a federal consolidation program.
Consolidation programs can help stabilize the financial situation of students as well as bring down the student debt ceiling.