If you are one of the many people struggling with student loan debt, bankruptcy may feel like the only option. Fortunately, this kind of debt can be resolved without filing for bankruptcy. There are programs, such as consolidation and forbearance, that many people are unaware of. Here are a few ways to settle your debt before you decide on something as drastic as a bankruptcy.
Even if you only have one loan outstanding, consolidation can be a great option for former students looking to eliminate their debt. You can find federal student loan consolidation pretty easily. These programs work by taking all of your loans and lumping them into one. The result is one monthly payment with a lower interest rate. With federal programs, you can be given as long as 30 years to pay back the loan, which can make your payments much more manageable and not damage your credit. Private consolidation can also be a good alternative to bankruptcy.
These programs work slightly differently. A private consolidation company will work with your creditors to settle the debt for less than what you owe. That amount is then broken down into smaller monthly payments with a standard APR (usually right around 10%). While this will reflect on your credit report as a settled debt, it doesn’t look as bad or carry the consequences, of a bankruptcy.
Forbearance is one of the nicer things available to these kinds of loans. While most loans will have a set amount you have to pay each month over a certain amount of time, a loan program designed for students will typically offer additional options. If you are facing a tough financial decision such as bankruptcy, it can save your credit to look in to these programs. The forbearance will essentially extend your loan payoff date. If you are facing a situation where you can not afford to make your monthly payments, the forbearance can give you a set number of months to not worry about it. Most of the time a forbearance is available for 3-9 months, and only if you qualify.
Losing a job, divorce, a death in the family, or unexpected hospital expenses are just a few of the reasons that a specialist loan company will offer a forbearance. While it’s not a long term solution, it can give you the time you need for a few months to get things in order. Often it can save you from bankruptcy. Before you look at filing bankruptcy over student loan debt, you should look at some of the programs available to help you out of a crunch.
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