Unfortunately, the golden promise that college will result in a high-paying job does not always come true. Increasingly, people are graduating from college to find a more-difficult-than-expected job market and almost immediate commencement of student loan repayment. Although student loan relief may not solve the whole problem, there are several strategies that can help manage payments until circumstances approve.
In some regions, government and private loans offer periods called deferments for those having difficulty making ends meet. These deferments are typically granted based on factors such as economic hardship, a return to school, or even debilitating injuries that prevent employment. Deferments are often available in six-month or year-long periods up to a maximum of several years. Applying for a deferment can be a good way to put off payments for a while, but bear in mind that interest may keep accruing during a deferment, substantially raising total debt.
Some loan programs offer a payment method called income-based repayment that can provide some student loan relief. Instead of a set monthly payment used in standard plans, this system uses income data to set payment levels every year at a percentage of earned income. In some plans, if income is below the national poverty level, the loaning body may even pay interest and require no payments until income improves. Income-based repayment is only available on certain loans, and usually only applies to government student loans.
Consolidation is a strategy that can also provide some student loan relief. Since many people take out several loans from different sources, repayment can mean paying several different lenders with different due dates and interest rates. If a payment is missed or skipped, huge fees can be added on to the cost. Loan consolidation allows one company to buy all the loans and offer repayment options at one interest rate that is generally quite low. Consolidation may also reduce the size of payments by offering a longer repayment period. Some experts do warn that accepting an extended repayment period can be a problem, as the longer repayment lasts, the more interest will accrue, making the total debt higher.
Some federal loan programs offer student loan relief to those who take certain jobs. Joining the military, becoming a public school teacher, or working in the public health system can all result in student loan relief. Generally, these relief programs work by forgiving debt after a person has worked in an applicable field for a certain amount of time.
It is important to note that some regions, including the United States, do not forgive student loans in case of bankruptcy. Defaulting on a student loan can have devastating consequences to credit and result in long-term wage garnishment and other consequences. Utilizing options such as deferment, extended repayment, and income-sensitive plans can lower the chance of default and help manage rocky income periods over time.