A common financial hardship that many Americans face is seemingly insurmountable student loan debt. While these loans can provide you with excellent educational opportunities and allow you to pursue your dreams, they become a burden when one finds they aren't earning enough with their degree to make their monthly payments. But if you find yourself in this situation, there are student loan solutions that can help you find financial stability once more.
Are you looking for ways to get out of the cycle of overwhelming student loan payments? Our experienced team is here to help. Start by reading on for more information about student loans, including what can happen if you don't make your payments and what options you have that can help.
Are You Overwhelmed by Student Loan Payments?
How Student Loan Debt Impacts Your Life
Many people go to college to meet requirements for jobs in a variety of different fields or simply to pursue an education in their field of interest. Few students have the resources to pay steep tuition fees, which have skyrocketed to astronomical levels in recent years, along with meeting other needs. To compensate for this, these students take out student loans, which allow them to pay their tuition and don't need to be repaid until after they finish school.
Once the grace period has passed for these loans, however, steep monthly payments kick in. This issue becomes compounded if the borrower took loans from multiple lenders, including both federal and private institutions. These payments can become a massive burden, affecting the borrower's ability to buy a home, start a family, or otherwise pursue their financial goals as they wish.
What Can Happen If You Don't Make Payments on Your Loan?
Because repaying loans can become such a burden, you may consider just not making the monthly payments that come due for the loan. However, missing your payments or letting your loan turn delinquent can have negative consequences for your financial well-being, such as these possibilities.
As with paying back most any type of loan, not making your payments on time can cause the amount you have to pay back to increase. Together with the interest that accrues over time as the loan is outstanding, this can cause the amount you have to pay back to grow to insurmountable levels.
Your student loan provider will often impose late fees on you for missed payments, for starters. However, more fees will also be added on by a collections agency if they are called on to pursue you for payment. Not making your payments on time will leave you paying more in the long run than if you made your payments on time.
Penalties to Your Credit
Your credit score is essential for just about every financial decision you wish to make in your life. From securing financing for a vehicle to getting approved for a mortgage agreement to get yourself a new house, transactions of all kinds will involve the potential lender checking your credit score to determine if you're likely to give them a return on their investment. Not paying off your student loans on schedule will have a negative impact on your credit score.
When payments for your student loans reach a point where they are over ninety days overdue, the loan official becomes delinquent. This information will be reported to all three of the country's major credit reporting institutions. As a result, you'll see your credit score go down, negatively impacting your future financial prospects and your freedom to make the life decisions you wish to make.
Tax Refund Seizure
Everybody loves the boost to their bank account that often comes around tax season if you're due for a tax refund. That substantial bit of extra money can help you make big payments towards any number of things, from automobiles to home appliances and other essentials. Many have come to rely on this yearly boost to their finances, but if you don't make your student loan payments, you may not be eligible to receive your refund.
The federal government may not become involved in collecting on your student loan for some time, but once it does, the power it has available is considerable. This includes the ability to seize your tax refund to put that money towards your outstanding debt instead. This sudden loss of your tax return can be a severe financial hardship for people who rely on this annual boost to their income.
You work hard for your paycheck, and use the money to cover all of your needs. But if you aren't keeping up on your student loan payments, you may see a portion of your paycheck taken away and automatically put towards paying down your loan.
Wage garnishments are a power that the federal government has to settle your outstanding loan. Avoid having your paycheck taken away from you by managing your student loan repayment issues so that the collections process never reaches this point.
Possible Student Loan Solutions
While all of these possibilities can seem daunting, there are ways that you can help yourself out of this situation as well. Here are some potential student loan solutions that can help alleviate your financial burden:
Apply for a Repayment Program
Depending on who you borrowed a student loan from, your provider likely offers a few different options that can help you if you're struggling to make your monthly payments. Look into these options to make your monthly payments more manageable.
Three programs that you should look into include income-based repayment, pay as you earn, and revised pay as you earn programs. These will adjust the monthly payment that comes due based on your income and family size, making meeting your monthly payments more achievable.
Refinance Your Loans
Another potential student loan solution available to you would be to refinance your loans through a different provider. There are several agencies out there that offer such a service to student loan borrowers.
Refinancing your loans has the benefit of consolidating the loans all under one provider if you had multiple lenders previously. You also may be able to get a lower interest rate, which will reduce the amount you pay over time.
Know What Legal Protections are Available
Just because you took out a loan and need to pay it back doesn't mean you don't have certain rights under the law that need to be respected. Financial institutions and collections agencies have certain regulations that they must abide by when seeking repayment on one of their loans. For example, they aren't allowed to harass you at all hours of the day seeking repayment. Knowing your rights is the first step in seeking student loan solutions to your issue.
Getting the right legal consultation on your side will keep you informed of all of your rights as a borrower and give you someone dedicated to protecting your rights. We'll fight on your side to give you the support you need to stand up to lenders and collection agencies who act outside of their legal limitations. Contact Thomas K. McKnight LLP in Santa Ana today for a free consultation so you can start on the path toward financial freedom!