College education can be expensive and a large number of students turn to financial institutions and other lending sources to finance their studies. While securing a loan may not be a difficult task repaying the loan can be a daunting task for many. This could be due to many reasons – it could happen due to worsening of financial condition of the person over time (due to debts or due to unexpected expenses or loss of job or business losses etc) or due to general change in the economic situation (e.g. the interest rates on loans could rise or drop due to changes in monetary policies by central banks, etc) or due to other reasons.
Though strategies for dealing with debt are similar for different kinds of loans, here we will be talking mainly about the student debt. Fortunately, there are options offering financial solution to students who find it difficult to repay their debts.
Consolidation is one of the most popular options to solve the loan repayment issue for students. It enables people to combine several loans into one low interest loan. Most consolidation loans allow the student to pay off their loans over a period of thirty years and hence decrease the monthly payment. On the flip side this may lead to increase in the total cost of loan repayment due to the added cost of interest.
Students can also request for deferment or temporary suspension from the lending source. This is applicable if a person is unemployed or has re-enrolled for further education. No interest has to be paid during deferment if students have a subsidized Federal Family Education Loan (FFEL), Direct Stafford Loan, or a Federal Perkins Loan. Since deferments are not given to defaulters one has to ensure that all payments are made till it is granted.
A temporary suspension or reduction of payments can also be requested. This is a good option for those who have a temporary financial problem. This process, also known as forbearance is an extension of the loan repayment time. However the interest will accrue on the loan and has to be paid irrespective of the kind of loan a person holds.
In some rare cases, cancellation of loans is also possible. Although cancellations are not granted for financial reasons they are implemented if an educational institution closes before the completion of program or if the student becomes permanently disabled.
Students need to understand that ignoring their loans may lead to various undesirable situations hence it is in their best interest to chose the best repayment option and become debt free.
