GreenPath discusses student loan debt options, as debt reaches new high in Q2 2012

The New York Fed recently reported that outstanding student debt rose 1.1 percent from $904 billion three months earlier. The loans were taken out by students and their parents, and the majority are backed by the U.S. government.

Ninety-day delinquency rates for student loans increased to 8.9 percent from 8.69 percent in the first quarter, the New York Fed said. Since the peak in household debt in the third quarter of 2008, student-loan debt has increased by $303 billion, while other forms of debt fell a combined $1.6 trillion.

Where to turn to for assistance with student loan debt?

GreenPath works with people everyday who are struggling with student loan debt. Some of the advice that we give includes:

There is a new federal program called Income Based Repayment (IBR) that adjusts your monthly student loan payment relative to your current income level and family size. Also, there is a provision that if you are working as a teacher, at a non-profit, or as a public service employee, you could be eligible for the loan to be forgiven in full after 10 years of qualified payments. Learn more at http://www.ibrinfo.org/.

Stafford Loans have a specific program for teachers, in which up to $17,500 in principal and interest can be forgiven after five years of teaching in a low-income area or other districts that meet specific requirements. A call to your student loan lender can help you find out if you are eligible for this.

Since not all student loans participate in IBR or loan forgiveness, you could certainly ask your lender about a graduated payment. Graduated payments result in a lower payment for a pre-determined amount of time, but the payments will eventually increase. This could make sense if you felt something will change in your financial situation. Make sure to ask the lender in advance what your payment will be when it increases, because it will be necessary to have the income to meet this payment further down the road.

If you’re experiencing a short-term hardship, it could make sense to contact your lender about a deferment or forbearance plan. This could mean that your lender will not require payments for a period of time. Make sure to ask your lender if it will continue to charge interest, or if the interest will be stopped during this hardship.

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