Nice Article for Student

It’s in the news these days.  Unemployment is very high and newly minted college graduates are not finding work of any kind.  If a you graduated in the spring of 2009 the six-month post-graduation deferment is coming to an end.  So what do you do if your student loan payments are supposed to start and you have not found gainful employment?

Do not ignore those student loans.  Defaulting on student loan payments causes the entire amount to come due.  Then the loan agencies will send collections agents after you.  The lender may garnish your wages.  The lender may garnish any state and federal income tax refunds due.  It is a black mark on your credit record too.  All these things are generally bad outcomes.  In general, bankruptcy does not discharge student loan debt either.

What do you do? Contact your lender.  You have several options available to you and the time to act is now.

1. For federal student loans deferment may be available.

• By now you know if you go back to school the deferment will continue, also if you join the military service, but also deferment may be available for unemployment or economic hardship (earning under $16.245, eligible for food stamps, public assistance or volunteering for the Peace Corps).
• Interest may or may not continue to accrue on the loan while it is in deferment; you may want to determine whether this is the case or not as accruing interest will cause your student loan payments to rise once the payments begin.
• For Federal loans unemployment deferments may be in 6-month increments for up to three years; economic hardship deferments may be granted in year-long increments for up to three years.

2. You can also ask for forbearance on a Federal or Private loan. The federal government also grants forbearance for health reasons or other circumstances.  Forbearance puts off the date the payment are due but interest still accrues, which means when you do start paying you will pay more than you would have had you started on time.  Sallie Mae may grant forbearance in 1-3 month increments for up to 2 years although they don’t generally grant forbearance in most cases.

3. Renegotiate the terms of the loan. See if your lender will extend the payment period to reduce your monthly payments to something you can manage.  This method will increase the amount of interest you ultimately pay.  Private lenders may also agree to reduce your interest rate as well.

There is a new federal program called Income Based Repayment (IBR) program.  If you qualify for this program your payments are capped at 15% of your income above a certain threshold; if you make less than this threshold no payments are due.  Eligibility weighs your debt against your income level; the loans must be Direct, Guaranteed or FFEL loans to students (not your parents) and the loans cannot be in default.  Any debt that remains after 25 years may be forgiven.  Once you are eligible for the IBR program you will not be kicked out just because your income rises to the point that you no longer qualify; the accrued interest will be added to your loan at that point but your loan payment will not rise above the 10-year standard monthly payment on the balance you owed when you entered the program.  Go to http://ibrinfo.org/ for calculators and all other information about this program. Note: Art and Business Consulting LLC is not affiliated with IBRinfo.org in anyway; this link will take you away from this website and you will be subject to their terms & conditions.

We hope you have found this information useful.  As always, taxation and small business services are our business. If you need help Please give Art & Business Consulting a call. We would love to engage you as a client.