What kind of loan is yours?
There are two basic kinds of student loans and you will want to know which one you have before you start the analysis. Do you have a private or a federal loan? Knowing your loan came from a particular source, such as Sallie Mae, is only the beginning of the analysis. There are publications out there that can help you determine what type of loan you gauranteed.
Can it be cancelled or discharged in Bankruptcy?
It is very difficult to cancel the obligation that is created when you get a student loan, but this should be evaluated for those in financial distress. Was the school closed, did it have a false certification or did borrowers at the school experience unpaid refund cancellations or other such issues? Has the person who had the student loan died? (If you are dealing with such an estate the student loans are automatically cancelled, but you must give the lender a copy of the death certificate). Do you qualify for Profession related forgiveness programs? (Teachers, federal or state programs?)
When in Default Rehabilitate or Consolidate!
Did you know you can be delinquent but not in default? If delinquent contact the lender and enter into an income-based repayment plan before you are declared to be in default! If you tried before and were denied be aware that a new income based plan came online on July 1, 2009. Apply again if you attempted to qualify before that date!
Forbearance and Deferments
Use these two strategies to postpone payments when you anticipate or are experiencing financial difficulties. Interest deoes not accrue for subsidized loans during deferment periods.
Negotiate!
Don't just sit there...put that education to work for you! Call them up, write them, and make the deal! Get a copy of the loan agreement so you know what your agreement says. Case by case negotiations for lower interest rates and deferred payment amounts work better when this article is being written then ever before because of the high rate of defaults and laws that are before Congress to change the ability to discharge the debts in Bankruptcy (none have passed...yet).
Use other laws
Challenge "Fair Debt Collection Practice Act" (FDCPA) violations by collectors. Request hearings to challenge collection actions in arbitration and then try and settle for amounts that are lower then waht you may owe before or at the hearing. The answer is rarely do nothing. Be proactive. Communicate and require communications in writing and make yourself available to the annoying but indispensible people trying to collect. When they can talk to you they are more amendable to settling or creating a plan you can live with!
