There is a lot of hearsay and nonsense out here on the Internet with regards to potential student loan relief; in order to plan for the future we need to know the laws and the reality that we face so we can place ourselves in a good position.
The fact is that there are types of help out there, and that your student loan payments should be affordable for every single one of you (if you’re not living a lifestyle which does not correspond with your income then chances are you’re fine, if not, well then you’re going to need to make some serious changes). There are several routes that can help you in your search for student loan relief and student loan forgiveness or diminution of the loans.
Firstly we should all realize that under the new laws, monthly payments on student loans can be capped and are attached to our individual incomes, so in truth we all should be able to afford the payments easily, unless our lifestyles have gotten out of control. This is the harsh reality that many of us have to face, and no cable television is not a right, nor is a brand new car, or maxing out your credit cards. Just because you may have a new degree and even a larger salary does not mean you can live well beyond your income level.
Paying off your student loans fast is the quickest road to a sound financial life, we pay more now so that we pay less over time. Often what hurts in the short term will feel wonderful in the long term, so we will look at some strategies to pay down our debts to get to that place. As you mature you will more easily begin to choose good long-term strategies and avoid the easy road, the easiest road is the hard road.
Of course, if we are disabled or defrauded then we can get our completely relieved from our student loan debt; however, this will only apply in quite rare cases. Nevertheless these protections do exist under the law, so we need to know about them. If you are in serious dire straits with your loans because of extraordinary circumstances then you have rights and protections under the law, the basis of all laws is justice and fairness, and laws regarding debts were written in the same spirit of the law.
Lastly, there are certain jobs that we can take which are incentivized with certain loan forgiveness perks. These jobs tend to be in volunteer, government, or education (nursing and social work may also qualify).
So, if you’re going into one of these particular professions then you’ll want to know about these extra benefits, as you can get a good portion of your student loan debts wiped out, most likely on the back end, but still, this can add up into the thousands of dollars.
10% of Your Income – Relief for the Under Employed – Use This in the Short Term to Get By
Recently passed legislation under President Obama can and will cap your student loan repayments at 10% of your monthly income, whatever that income amount might be. Now this is huge for those of us who graduated with a great degree but still haven’t found our dream job yet. Right? This if for you if you’re under employed right out of school, and this seems to be the intension of the law, to allow folks to make it through tough economic times without undue burden. Getting student loans shouldn’t be a massive burden, if it becomes so then our work force in this country will wither and die out, and our government simply can’t afford that.
It takes time to move into your career sometimes and to start earning the amount of money that we’re worth.
So, the President felt that these folks that are often working two or three menial jobs while waiting to get hired on within their field should get a break. And we couldn’t agree more. 10% of your income is fair, and even if you have a car note and rent payments, you should be in pretty good shape. The only way that these types of payments will become a real problem in this situation is if you’re are leaving way beyond your means, and this often means spending way too much on non necessities and most likely living on credit cards.
Credit debt is a cancer which will need to be eliminated so that you can easily meet your obligations with your student loans, and even start to get ahead of the game, but more on that a little later.
Now having said all that, paying the minimum amount on your student loans is not a great strategy over time. You will pay more in interest the longer that you have the loan, so we only recommend taking advantage of this type of loan relief if you haven’t found a great job in your field yet and you’re still just scraping along. This is what the law was intended to do, to help people to get by while they are transitioning into a new career. And also, if you do lose a good job and need to take more menial work to get by, jobs that pay less, that you will still be able to meet your student loan obligations because they are tied to your income. If your income levels drop then your student loan payments will also drop off, so this is meant to be a safety net for us.
It was not, however, meant as a sound financial strategy. The fact is that when you start earning a good income you’ll want to pay down your student loans as fast as possible so that you actually pay less.
Getting Real Student Loan Relief Involves Paying Down Your Loans to Zero
In order to get yourself into real financial shape you’ll need to pay off your student loans as fast as you possibly can. In the long run this is real relief because any debt that lingers is a drag on your finances. How do you think the rich get rich? It’s very simple they have lots of assets and few liabilities. Debt is a liability and a big one. The more debt we have the less opportunities we have to save and invest. The reality of the situation is that we should be paying down our debts faster for several reasons, one, is to free up capital to invest and the other is that when we pay if off faster we actually pay less. It’s simple economics, the longer you have a debt the more interest you will pay on that debt. We have to step back and look at the bigger picture to see what’s really going on here.
Have you ever heard those commercials on the radio? The ones that say, save money on your mortgage by refinancing? Well that is a big half truth, what they want you to do is perhaps refinance and get a better rate, but what those companies are really trying to do is get you to lower your monthly mortgage payments. Now, what does that do for your financial picture? It feels wonderful in the short term, hey, life is great, we feel like we have more money in our pockets. But the reality is that you have less and you can’t even feel it. The longer you stretch out the loan, the more you pay.
All types of debt have this attached to them, so we want to pay down our debts as fast as possible. How do we do this and maintain our sanity? There are several strategies that we can employ, but the two main strategies involve simply eliminating certain debts first and cutting back on our expenses.
If you read the biographies of many of the wealthiest people in the world there is a common thread, these people lived way below their means, they saved, and they invested. Don’t believe the hype that you should fake it until you make it, at least with regards to spending money on material goods. Most people that have made it have scrimped and saved. That is the truth that many people don’t want to hear.
In order to pay down your student loans faster, you’ll first want to eliminate any higher interested debt, and those will most likely be any type of auto loan or credit card debt. Especially if you have shaky credit, the worse your credit the higher the interest rates, and the more money that those debts will pull out of your pocket over time.
Student Loan Forgiveness
There are instances in which student loan debts can be forgiven, partially or in full. But as you might imagine they aren’t going to do this in many cases, and you have to have a very legitimate reason in order to qualify.
If you have a very serious disability in which you can’t work and this disability will continue on into the future then you’re student loan debts can definitely be wiped clean, but this obviously tends to be a rarity. However, if you’re in this situation and you can prove it in court then your debts will most likely be expunged.
If you were in some way defrauded in the loan application process and you can prove it, then yes, you can get your debts wiped out. But again, this is unlikely in the overwhelming majority of cases. You can’t just be lazy and say, I cannot pay my debts. This, of course, doesn’t work; it doesn’t work for any type of debt really. Student loans are actually very tricky debt in at least one way, it is low interest debt, and now it has monthly caps which float with income which is wonderful, however, this debt is very difficult to get forgiveness, especially in bankruptcy court. It is extremely difficult, in fact.
Loan Forgiveness Through Your Profession
You may attain student loan relief through your chosen profession. If you serve in the following capacities you may qualify for loan relief through the Public Service Loan Forgiveness Program offered by the Department of Education– corrections officer, teacher, nurse, government worker, volunteer worker, non profit worker, social worker, and U.S. armed services.
In order to quality for loan forgiveness in all of these professions (expect teacher), you need to may 120 payments towards your student laws and keep up with some fairly stringent paper work. If you can do this you may apply to have some of the remainder of your loans forgiven. So, if you are going into a profession which aims to help people, this is a nice extra bonus for you.
Teachers have a special type of forgiveness which may apply if they choose to teacher in certain under privileged areas of the country. This is great for someone if this is their calling in life, however, we don’t suggest that you do this in order to get your debt forgiven. Choose your profession based on what you want to do with your life, not on loan forgiveness options. It’s much better to like your job than to get a break on your loans. Life is short, choose a career that you truly love.
So there are your strategies and options in the loan relief arena. You have protections under the law, your monthly payments are capped at 10% of your income now, but don’t rely on such small payments if you truly want to get to a great place economically. Pay down all high interest debts as fast and possible and then work on your student loan debt, paying down the higher interest loans the fastest. If you take the hard road, you’re life will be so much easier, and you’ll have a lot more money at retirement.
Choosing certain career paths can offer debt reduction and of course we are all protected under the law when it comes to fraud and disability. These are the real strategies and options that we all have, so don’t believe any thing else what you hear when it comes to more disreputable sources online.
Author: Dave Rathmanner
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