If you are from the USA, then you are very familiar with the latest student debt crisis upcoming with the next generations. According to the New York Federal Reserve, as of the fourth quarter in 2016, the total student loan debt was 1.37 trillion with an increase of 78 billion just in 2016.
Student loans are now the second highest consumer debt behind mortgages and higher than credit cards and car loans. With increasing tuition at alarming rates, the byproduct has simply just been to allow for increased borrowing among lenders. In 2014, it was reported by National Public Radio, that in Arizona tuition for colleges has increased by 77%, Georgia it has increased by 75%, and in Washington State 70%. With debt and tuition rates increasing, it just does not seem very acceptable with the average wage decreasing with median families.
Debt and Planning
The first thing to do when approaching debt reducing plan is attaining a payment schedule, goal, and of course a positive attitude. If the borrower has racked up other debts then he/she needs to tackle the highest rates first and consider what decisions they made to get into this situation. In order to understand the best payments, the borrower needs to know where to find a student loan consolidation payment calculator. Also be sure to use this Public Service Loan Forgiveness Eligibility Assessment tool to determine your eligibility for complete forgiveness of your federal student loan debt after 10 years of qualifying payments.
Student Loan Consolidation
Student loan consolidation is a great concept and has many benefits. However, it is known that many people have consolidated their loans under the Federal Loan Consolidation Program and received less than stellar interest rates at around 6-8%. This is extremely alarming, considering the borrower has put their trust in the feds to allow for them to attempt to pay their loans. If someone has a significant amount of loans with an 8% interest rate and is making small payments; Then they could just be paying on the interest for a lifetime.
Income Based repayment
In order to be eligible for IBR, the borrower needs to consolidate their loans and then submit their income they are making in a 30-40 hour week.This is a great plan but like as stated before; Candidates need to analyze the short and long term benefits to make sure it is sensible. The IBR is a great way to go if you cannot make your current payments, need to payoff other debts, save a nest egg for emergencies, or are going for the non-profit student loan forgiveness program.
501 Non-profit Career and Volunteering
The 501 non-profit pathway is maybe one of the best ways to tackle significant student loan debt. However, there has been talk of Trump making changes to this scenario but it would seem there would serious backlash if this was to happen.
If one takes on a job or volunteers in a 501 – non-profit then their debt is dismissed in 10 years if all payments are made and on time. So, the best possible scenario or chain of events is to get your loans consolidated to the lowest interest rate possible, apply for IBR to attain a low monthly payment, and then apply for the 501 non-profit student loan forgiveness program.
A good thing to keep in mind is the “forgiveness” word is a little misleading as the total debt is forgiven if all payments are made on time for 10 years. Although, the borrower needs to pay a capital gains tax on the remaining amount.
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