Student Loan Defermest

Student Loan Defermest - Deferring payment on student loans is necessary when circumstances prevent a borrower from staying current on payments. There are many types of deferments available depending on the kind of student loan and the situation. For instance, deferments on private loans are completely discretionary to the lender. If a private lender wants to grant or deny a deferment they can, without consequences. Ironically, they may also charge a borrower requesting a deferment because they're unable to pay. Sallie Mae often charges $150 for a three month deferment.

For deferments of federal loans there are rules to be followed and made available to borrowers. The most common deferment on a federal student loan is the "in school" deferment. In other words, if a borrower is

in school for at least half-time, payments on the federal loans will be deferred. For Stafford loans there are also deferments available when a borrower is unemployed, in a rehabilitation training program, in a graduate fellowship, in the military service or following active duty, temporarily totally disabled or caring for a disabled spouse or dependent. Deferments are also available for economic hardship.

Economic hardship deferment applications must be in writing and can be issued in one year increments for a maximum of three years. To qualify for an economic  hardship deferment a borrower must show that they are receiving federal or state public assistance, are a Peace Corps volunteer, have an economic hardship deferment on another loan or is working full time but still at 150% of poverty. An unemployed borrower seeking a deferment must be registered with an employment agency and must show proof of eligibility for unemployment benefits. To obtain an economic hardship deferment on a Parent PLUS loan, all cosigners to the loan have to be unemployed.

In addition to deferments, borrowers can verbally request a discretionary forbearance for causes such as poor health or other personal problems. While a forbearance may be needed for a short term crisis it's important to remember that when a forbearance ends, all interest is capitalized, creating a long term significant increase in the amount of the student loan debt.

Report Details Woes of Student Loan Debt

Report Details Woes of Student Loan Debt - As in the housing market, securitization of student loans led to more aggressive underwriting for borrowers who could not possibly afford the debt they took on, according to a government report.

The 131-page report was formally released by the Education Department and the Consumer Financial Protection Bureau on Friday. It provides new estimates for total outstanding student loan debt: more than $1 trillion in 2012, composed of $864 billion in federal government loans and $150 billion in private student loan debt.

Cumulative defaults on private student loans exceeded $8 billion, a sum from over 850,000 distinct loans.
That total has risen in the last decade as lenders bypassed college financial aid offices and marketed loans directly to students. Students often signed on without realizing the difference between private and government loans or that government loans usually offered better terms, the report says.
Private student loans, for example, usually charge higher interest rates and are harder to discharge in bankruptcy.

Student Loan Debt Crisis: How’d We Get Here and What Happens Next? (US Education)

Student Loan Debt Crisis: How’d We Get Here and What Happens Next? (US Education)  - The amount of student loan debt and the rate of delinquency have been climbing for years now. If it seems like every new statistic is worse than the last, that’s because it is. Two studies released this week are no exception.

Credit bureau TransUnion says that in the past five years, the average student loan debt each borrower carries has risen 30% to $23,829. More than half of student loan accounts, which add up to more than 40% of the total dollars owed, are in deferral status. This is just a temporary reprieve; students can defer for only a few years before they have to repay.

The trouble is, many of them aren’t doing so. FICO Labs found that delinquencies rose by 22% in five years. For the newest group of loans it studied, delinquency rates are 15.1% — higher than the 11% cited by the Federal Reserve in a November report. Like the Fed’s study, the FICO analysis doesn’t include loans that are in a deferred status — which means the number of people who can’t afford to pay back that money may be almost twice as high as what the official delinquency rates reflect.

This situation obviously can’t be sustained over the long term. “I think a few more years and it’s going to be a general crisis,” says Barry Bosworth, an economist at the Brookings Institution. Interest rates are unusually low right now; when they rise, more borrowers who were just keeping their heads above water are liable to become delinquent.

Note EU-Digest: some European Governments like that of the Netherlands have also started to move away from Government subsidized student support and opted for a privatized student loan system. Given the results obtained in the US with this privatized loan system it does not seem to be the proper way to proceed.

Student Loan Debt Could Cripple Economy For Decades

Student Loan Debt Could Cripple Economy For Decades - The price of a college education has been climbing at a substantially higher rate than inflation for years; meanwhile, the value of a college degree has been falling. That’s why thousands of debt-laden college graduates are facing the worst economic bust to plague the United States since the housing bubble burst.

A recent report from the Center for College Affordability and Productivity, entitled “Why Are Recent College Graduates Underemployed?”, refutes the oft-repeated theory that college educated Americans have the potential to earn substantially higher lifetime incomes than their uneducated peers. In fact, the report indicates that many college-educated Americans are woefully underemployed because “the growth of supply of college-educated labor is
exceeding the growth in the demand for such labor in the labor market.”

From the report: 

• About 48 percent of employed U.S. college graduates are in jobs that the Bureau of Labor Statistics (BLS) suggests requires less than a four-year college education. Eleven percent of employed college graduates are in occupations requiring more than a high-school diploma but less than a bachelor’s, and 37 percent are in occupations requiring no more than a high-school diploma;
• The proportion of overeducated workers in occupations appears to have grown substantially; in 1970, fewer than one percent of taxi drivers and two percent of firefighters had college degrees, while now more than 15 percent do in both jobs;
• About five million college graduates are in jobs the BLS says require less than a high-school education;
• Comparing average college and high-school earnings is highly misleading as a guide for vocational success, given high college-dropout rates and the fact that overproduction of college graduates lowers recent graduate earnings relative to those graduating earlier;
• Not all colleges are equal: Typical graduates of elite private schools make more than graduates of flagship state universities, but those graduates do much better than those attending relatively non-selective institutions;
• Not all majors are equal: Engineering and economics graduates, for example, typically earn almost double what social work and education graduates receive by mid-career;
• Past and projected future growth in college enrollments and the number of graduates exceeds the actual or projected growth in high-skilled jobs, explaining the development of the underemployment problem and its probable worsening in future years;
• Rising college costs and perceived declines in economic benefits may well lead to declining enrollments and market share for traditional schools and the development of new methods of certifying occupation competence.

Meanwhile, over the past five years the average amount of student loan debt accrued by college students has risen by 30 percent to $23,829. More than half of student loan holders have currently deferred student loan payments, which is only a temporary solution for struggling degree holders.

Some economists expect the American economy to struggle for decades under massive student loan debts because student loans are almost impossible to discharge in bankruptcy and the government will collect by garnishing the paychecks and tax refunds of those who fail to pay. Furthermore, being underwater on student loans can harm a person’s credit score, making it more expensive for them to get loans for homes or vehicles.

As more and more Americans struggle to pay back student loans while underemployed, the economy as a whole will suffer, since the purchases of first homes and other durable goods are put off indefinitely.

Source : personalliberty.com

Money Doesn't Grow on Trees

Money Does Not Grow on Trees - It has now been over one month since my student loans entered repayment.  One month of numerous letters, emails, and telephone calls.  The letters arrived first to remind me of my upcoming payments.  Then the emails began and finally telephone calls.

     In reply, I have sent mail to all of my lenders and I have called them.  As I have stated in earlier posts, my lenders are unwilling to make different repayment schedules based on my financial situation.  That is, with the exception of my federal loans.
     My federal loans account for approximately $33,000 of my student loan debt.  Therefore, they represent about 25 percent of my total debt.  $33,000 is by no means a small amount and so I applied for Income-based Repayment.  I applied about a month ago through the Department of Education’s website and Nelnet.  It was a simple process that took approximately 15

minutes to complete.  Income-based repayment, or IBR, uses tax information from the IRS to determine how much money is owed per month.  Since I had current IRS information, a lot of work was streamlined.

     The decision has now been made regarding my application.  I found out this past week that I qualify for the IBR plan.  Five loans are under the plan, which amounts to $26,800.  Since I qualify, my monthly payments have been reduced from $304.55 to $0.  Yes, zero dollars.  The reason for that is because of my total debt to income ratio.  Although I wanted to qualify, I was unsure if I would.  Now that I have, it’s a good start to my student loan debt.

     By saving the $304.55 per month, my income almost covers my private loan debt.  However, I am still in the red by about $100 per month.

     Now that I know I qualify for the Federal guidelines of the IBR plan, it reaffirms my commitment in seeing new repayment plans for private loans.  If private lenders adopted a similar plan to IBR, student loan debt would be manageable.

     I am thankful for the Federal repayment plans and am hopeful that they will one day extend to all student loans.  After all, Money Doesn't Grow on Trees.

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