The rising cost of higher education means that student loan debt is an issue that affects the overwhelming majority of graduates. Unlike an unpaid credit card balance, unsecured loan or repossession deficiency it is necessary to pay off college debt in full. The current legislation dictates that debt solutions, such as bankruptcy and debt settlement programs, cannot normally be used to reduce or clear loans that were taken out for academic purposes.
Bankruptcy and Student Loan Debt
As already alluded to, student loan bankruptcy cannot normally be used to pay off college debt. The reason it isn’t possible is because it will cost both the banks and the federal government billions of dollars. However, a borrower who has had their earning capability thwarted by an illness, disease or injury that is set to last the remainder of their life may qualify. This means that only a small percentage of graduates will be able to declare bankruptcy to escape their debts.
Student Loan Debt Consolidation
It is possible to take out a bank loan to consolidate student loan debt. This means that it is either possible to extend the borrowing term to reduce monthly repayments or reduce the length of the loan so that it so that it is possible to pay off college debt more quickly. This strategy is only recommended when a graduate has borrowed a high percentage of money from the banks, rather than the federal government. Subsidised federal student loans should rarely be consolidated.
Pay Off College Debt by Living with Parents
One of the quickest ways to eliminate student loan debt is by living with parents until any money owed fully is cleared. The repayment plan can be expedited because living expenses will be a lot lower. Whilst living at the family home is a minor inconvenience, it may be possible to clear debt within a few years. The more quickly it is cleared the less interest has the chance to accrue.
Student Loan Forgiveness Programs
The commencement of employment in a public sector occupation, such as teaching or nursing, could mean that a graduate is eligible for a student loan forgiveness program. For each year of service, a fixed percentage of student loan debt will be written off. The problem is that a lot of these programs have been scaled back in light of the economic downturn.
How to Clear Student Loan Debt
There are no easy answers when it comes to paying for the cost of higher education. Student loan bankruptcy is unlikely to be possible so it is necessary to pay off college debt by living at home or through a student loan forgiveness program (if working in a suitable public sector vocation). Student loan debt consolidation should only normally considered by those who have mainly bank loans.