How to Get Rid of Student Debt

By: Michael Millington

Student debt is a lingering financial thorn in the side of many Americans who have attended college. The massive amount of money that has to be paid back to the government can leave some people in terrible financial standing. Many individuals spend their entire lives trying to pay off their student loans. The worst part about student debt is their stubbornness to be resolved in regards to debt relief. However, there are ways that student debt can be resolved without having to pay. First, we must understand the nature of student debt and what options we have to eliminate it.

 

What is Student Debt?

Student debt refers to the debt we incur when we take out loans to fund our education. Mainly, this occurs when we attend colleges or universities. The loans we take out are from various sources, but two main types of loans are utilized: federal loans and private loans. Private loans vary by size and lender, but are mostly categorized as unsecured debt once given. Federal loans are always classified as secured debt and have the hardest time being discharged.

In relation to other types of loan debts, student debt acts in a similar fashion. You make monthly payments on your student debt until you finish the entire amount. Interest is a factor as well, generally inflating the amount of money due and prolonging the amount of time you pay. It is not uncommon to have student debt stay with you well into your later years. Many individuals may never acquire the proper form of employment to help pay off their student loans, leaving them whittling away at a massive amount of debt.

Student loans mostly have to be repaid gradually after you finish (or otherwise leave) your college or university. Repaying the amount is a consistent action that, if missed or neglected, can create severe financial issues for the borrower. As with any debt, failing to pay on your student loans can cause the debt to go into default. Defaulting on a loan can create severe financial issues, such as credit rating drops and wage garnishments.

 

What Happens to Defaulted Loans?

When a student loan goes delinquent for a certain period of time, it is considered to be in default. When a loan is in default, it can be subject to collection actions amongst other negative effects. As with other loans or credit accounts, student loans get assigned to a collection agency. Defaulting on federal student loans, however, can create other long-lasting problems to deal with.

Having a student loan go into default will hinder your eligibility for additional federal student aid. This could, in turn, disrupt your education. Also, the entire amount of your loan (interest included) would be made due immediately. You could be subject to wage garnishments if the federal government requests it to happen. Having the loan reported as delinquent will have a negative impact against your credit as well. It can take years to repair a credit rating that has a defaulted loan attached.

One major effect of a student loan going into default is the ineligibility for deferment or forbearance. Both of these actions can help to avoid defaulting on a loan if it becomes difficult to make payments. Once a loan is in default, all options to prolong the payment will be suspended. Another benefit that can be taken involves your taxes. Federal and state taxes can be withheld through what is known as a tax offset. In this instance, any refund received through filing taxes would be allocated towards paying off a defaulted student loan.

 

Can Student Loans Be Eliminated?

In short, student loans can be eliminated, though it is difficult to do so. Student loans can either be discharged or forgiven to be eliminated. In most instances, forgiven student loans only deal with a portion of the total amount. It is only with a discharge can a student loan be eliminated without being paid for. Both forms of debt elimination have very specific ways to be achieved.

Some student loans can even be subject to a restructuring through a Chapter 13 bankruptcy. This is the alternative many people look towards when they cannot discharge their debt through other means. Chapter 13 bankruptcy can help to condense debts into payments that are easier to manage, based on the borrower’s income and expenses. The main problem with this form of debt relief is that the bankruptcy will have a negative effect on your credit for at least seven years.

Student loans are the hardest thing to eliminate because they are normally federal loans. Akin to trying to eliminate tax debt, student loans will generally stay with you until you’ve completely paid off the principle amount and the interest. Categorized as secured debt, federal student loans remain one of the hardest loans to eliminate.

 

While federal student loans can be difficult to deal with, they are not impossible to eliminate. With dedicated budgeting, a strong will and an adequate payment plan, federal student loans can be conquered. However, the addition of other, unsecured debt can hinder anyone’s ability to deal with student loans. Credit card debt, medical bills and more can easily derail any financial plan. Guardian Debt Relief can help you handle your unsecured debt while you tackle your federal student loans. We might even be able to settle your private student loans as well. Give us a call and one of our debt specialists will provide you with the information you need. Your consultation call is free, but the information can help save you a lifetime of debt. Don’t delay! Take the first step and contact Guardian Debt Relief today!