Student loan debt: coping with the crisis

In addition to the paucity of work out there, many Posse List members are under the crushing burden of student loans.  We have followed the reports on various proposals under the stimulus package and other programs to forgive and/or abate student loan debt including discussion of making student loans all or partly dischargeable in bankruptcy.

In the meantime we have been inundated with requests from Posse List members on present alternatives available.

We’ve discussed the issue with debt counsellors and checked the web ourselves and the following information is our preliminary input.   If you have suggestions, sites, references, etc. please send them along so we can post. 

1.  Loan deferment:  it may not apply in all cases/circumstances and it’s a tough choice.  It will actually increase your debt because the interest does not stop and you are capitalizing that interest.   And, of course, you increase the payments owed after the deferment period.  Because this increases the total amount paid on the loan significantly, it is usually suggested that you not defer unless it is absolutely necessary.  But it gives you a break from making payments for some time, depending upon the deferment type you qualify for and the situation you are in.  For a good source on this and other loan issues click here.

2.  Have you considered joining Peace Corps or Americorps?  Ok, maybe too desperate for you?  Well,  you’ll recall the two Posse List members who went to Iraq about 1- 1/2 years ago on civilian gigs and got their loans wiped out.  There are Federal programs that will forgive part of your student loans for so many hours of community service served in a calendar year.  Also, if you work as a teacher in some areas or become a civilian government worker (Iraq? Afghanistan?) you could receive total student loan forgiveness.  Sources: here, here, here, here and here.

3.  Income-Based Repayment (IBR):  This is the new payment option for federal student loans.  Starting July 2009, it will help borrowers keep their loan payments affordable with payment caps based on their income and family size. For most eligible borrowers, IBR loan payments will be less than 10 percent of their income – and even smaller for borrowers with low earnings. IBR will also forgive remaining debt, if any, after 25 years of qualifying
payments.  For eligibility and details click here.
 
4.  The College Cost Reduction and Access Act of 2007.  The Act  established a new public service loan forgiveness program. This program discharges any remaining debt after 10 years of full-time employment in public service. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments. (Borrowers may consolidate into Direct Lending in order to qualify for this loan forgiveness program starting July 1, 2008.)  For eligibility and details check these two sites: here and here.

As we said, if you can direct us to other sources please contact us: manager@theposselist.com  In the meantime we’ll post more information as we do further research.