Ease the Burden of Student Loans
If you're struggling to pay down your debt, you may find relief through loan-deferment or forgiveness programs.
Defaulting on student loans is a bigger problem than federal government data suggest, according to The Chronicle of Higher Education. An article published July 11 in The Chronicle reports that the government vastly undercounts the number of borrowers who fail to pay back their student debt.
The last thing you want to do is default on your loans, which will hurt your credit score, make you ineligible for future federal student loans and may prompt the government to seize your wages (when you get a job) and tax refunds. Instead, explore the various loan-deferment and forgiveness programs.
You'll have more options if you have a federal student loan. You're entitled to a deferment (temporary suspendions of payments) if you can't find a full-time job or experience economic hardship. FinAid.org has a calculator to help determine whether you'll qualify for deferment.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you're not earning enough to keep up with your student-loan payments, you may qualify for the relatively new Income-Based Repayment (IBR) plan. The plan, which was introduced in July 2009, reduces the monthly payments for borrowers with high federal studen-loan debt relative to income. You pay nothing at all if your income is less than 150% of the poverty level. To qualify, you must have a Stafford, Grad PLUS or consolidation loan and your new monthly payments must be lower than the amount you would pay under a standard ten-year repayment plan for these loans. Visit Student Aid on the Web for more information about eligibility, monthly payment amounts for a range of incomes and a calculator that will help you determine whether you'll benefit from the program.
You might qualify for federal loan forgiveness if you work in a public-service job, work in an underserved area or work at a national service organization, such as AmeriCorps. See How to Shed Student Debt for more information about these options.
If you have private student loans, speak to your lender about stretching out the loan term to lower your monthly payments. You'll pay more interest over the long term, but it will help now while you're struggling to make ends meet. Or shop around for the best terms you can find on a private-loan consolidation (compare programs at SimpleTuition.com). Consolidating also lets you stretch out the term of the loan, which may lower your monthly payments.
Follow me on Twitter. Log on to Twitter at 8 p.m. ET July 21, when I'll be answering questions about saving for college during a #dealchat hosted by Natalie P. McNeal, of TheFrugalista.com. Type #dealchat in the Twitter search field to follow the conversation.
-
Stocks Chop as the Unemployment Rate Jumps: Stock Market TodayNovember job growth was stronger than expected, but sharp losses in October and a rising unemployment rate are worrying market participants.
-
Should You Renew Your CD?With rate cuts impacting earnings, we examine if now is a wise time to renew CDs.
-
7 Ways to Plan Now to Save on Medicare IRMAA Surcharges LaterUnderstand the critical two-year lookback period and why aggressive planning before you enroll in Medicare is the most effective way to minimize IRMAA.
-
New Ways to Use 529 PlansTax-free withdrawals from 529 plans could help you sharpen your job skills.
-
I Want to Help Pay for My Grandkids' College. Should I Make a Lump-Sum 529 Plan Contribution or Spread Funds out Through the Years?We asked a college savings professional and a financial planning expert for their advice.
-
How Intrafamily Loans Can Bridge the Education Funding GapTo avoid triggering federal gift taxes, a family member can lend a student money for education at IRS-set interest rates. Here's what to keep in mind.
-
How an Irrevocable Trust Could Pay for EducationAn education trust can be set up for one person or multiple people, and the trust maker decides how the money should be used and at what age.
-
UTMA: A Flexible Alternative for Education Expenses and MoreThis custodial account can be used to pay for anything once the beneficiary is considered an adult in their state. There are some considerations, though.
-
Coverdell Education Savings Accounts: A Deep DiveWhile there are some limitations on income and contributions, as well as other restrictions, a Coverdell can be a bit more flexible than a 529 plan.
-
529 Plans: A Powerful Way to Tackle Rising Education CostsContributions to 529 plans grow tax-free and are not taxed when they are used to pay for qualified educational expenses for the beneficiary.
-
Five Ways to Save on Vacation Rental PropertiesTravel Use these strategies to pay less for an apartment, condo or house when you travel.
