It is sometimes surprising to see how much you owe after graduation. These Colorado student loans not only create financial troubles but also become a hurdle in achieving your financial goals. Avoiding them, by any mean, is not the right solution. Because you’ll be required to face the consequences after all. But there are some options that can help to make your loan payment more manageable. Read on to find some workable solutions for your Colorado student loan debt.
Keywords: Student loan, student debt, student loan debt, deferment, and forbearance, consolidating student loan, Income-driven repayment plans, loan forgiveness programs.
Student loans have become a normal part of the lives of graduates and undergraduate students. Although Colorado ranks amongst the 15 states with least student loan debt averages. But still, 53 percent of the population owe some form of student loan debt. This further hinders their ability to achieve their financial goals in the long run.
With bills piling up and struggles to meet the daily living expenses. A person might take Colorado student loan debt as a least important priority. He may also find it tempting to avoid paying or hiding from debt collectors for the time being. But this further leads to greater negative consequences. As student debt is collected by the IRS. And they can garnish your wages or seize other federal benefits once you loan enters a default status.
So, it’s better to have a plan prepared to avoid defaulting of your student loans payment. And if you cannot pay them, there are still some options for student loan forgiveness in Colorado. Here is the list of options you can consider to effectively tackle your student loan repayment.
Select the Right Repayment Plan
There is a Standard Repayment Plan (SRP) for paying student loans. Which is a 10-year plan and is the fastest way to pay back the student loans. But the monthly payments are relatively higher.
The government has provided many other payment options to help students easily overcome the debt burden. For example, if your income is currently low but expected to rise, you can opt a Graduated Repayment Plan. This allows postponing your loan debt for 2-4 years. However, you need to pay the interest during this time period. Also, you need to plan ahead for the larger payments in the following years.
You can also qualify for Income-Driven Repayment Plans if you are currently struggling with financial hardships. There are many plans such as Income-based Repayment Plan (IBR), Repay as You Earn (REPAYE), Income-Contingent Repayment Plan (ICR) and Pay as You Earn (PAYE).
The general outline is that all these income-driven plans depends on your current income. And you’ll require to pay 10-15 percent of your discretionary income depending on the family size. If you successfully make monthly payments for a period of 20 years, the remaining outstanding debt will be forgiven.
You can use this calculator by the Consumer Financial Protection Bureau (CFPB) to find the one that suits your needs.
Consolidation to a Federal Direct Loan
If you have to pay multiple student loans to different loan servicers. You can consolidate them into a single big loan payable to a single loan servicer. The interest rate will be the weighted average of the interests of all your consolidated loans. So, you cannot lower the interest rate by this approach. Moreover, consolidation only works for the federal loans and you will be required to pay your private student loans separately.
Once the Department of Education approves your Direct Consolidation Loan (DLC). The standard repayment plan will be set as 10 years but is also extendable to a period of 30 years. In this way, you’ll get more income to spend on other goals. But the trade-off will occur in the form of paying more as interest. Another downside is that you won’t be able to qualify for the income-based repayment plan. Moreover, you’ll have to give up cancellation benefits and other borrower protections. So, carefully evaluate the cost and benefits before considering this option.
Deferment or Forbearance
If you are currently facing economic hardships or unemployment, you may qualify for deferment or forbearance. Deferment allows postponing your loan payment for a period of three years. You may or may not need to pay the interest depending upon the type of deferment you opt for.
Of if you didn’t get approved for deferment, you may qualify for forbearance. It allows postponing the payment for a period of one year. However, it needs to pay the interest during this time. But you should carefully analyze your financial situation before considering any of these two options.
Apply for Loan Forgiveness Programs
There are many programs that can help to forgive your student debt. For example, those working as a teacher can get their debt removed after a 5-year period. Similarly, those working in government or non-profit organizations can get a similar relief after a 10-year period. Also, organizations such as AmeriCorps and Teach For America are helping to pay the student debt. So, check if you can apply for these type programs to have a debt relief.
Filing Bankruptcy for Student Loan Debt
If student loans aren’t your only debt issue you may want to consider bankruptcy. Avoid foreclosures, car repossession and more.