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Dealing with Student Loan Debt
When students take out loans, they often have no idea what they are getting into. Their goal is to finance their education. But there is some important information that you should know about your student loans for long-term management and ultimate relief.
Topics we’ll cover in this video:
- Can a lawyer help with student loan debt?
- Does the type of loan matter?
- What are student loan debt buyers?
Types of Student Loans
Student loans may originate from the federal government or a private financial institution, such as Bank of America, Chase, or Charter One Bank. Many organizations offer private student loans.
After a loan originates, it is generally transferred to a servicer or depositor, such as the National Collegiate Student Loan Trust or American Education Services. These servicers ultimately manage the loan, including handling the collection of payments. Typically, the company you contact regarding your student loans is not the same organization that lent you the money.
If you’re struggling with overwhelming debt associated with your student loans, it may be wise to consult a lawyer about your realistic options. There’s a lot of misinformation and scams regarding student loan debt relief. You should get the facts from a legal professional.
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A founding partner at LHA, Jeremiah E. Heck, is a leader in consumer law, known for fighting large banks and sound guidance to avoid foreclosure.
Federal & Private Student Loans
The type of student loan you have will determine how it is managed and your options for repayment and relief.
Federal Student Loans
Federal student loans are funded through the Department of Education. They often have the lowest interest rates, and you have many options for repayment. If you have trouble repaying federal student loans, you may be eligible for many paths to relief.
Private Student Loans
Student loans funded by a bank or credit union are “private” student loans. They often have high-interest rates, and payment arrangements are rarely flexible. If you fall behind on a private student loan, you may be facing severe negative consequences. You may even be sued in a student loan lawsuit.
Other key differences between federal and private student loans:
- Repayment Period – You do not have to begin repaying federal student loans until you graduate, leave school, or are enrolled less than half-time. Most private student loans enter repayment status while you are still in school.
- Interest Rates –Interest rates for federal loans are fixed and often much lower than private loans. Private loan rates are usually variable and three times a federal student loan.
- Credit Score Requirement – You don’t need a specific credit score to qualify for a federal student loan. Private student loans often require established credit and interest rates typically depend on your credit score.
- Needing a Cosigner – Most federal student loans do not require a cosigner. However, private student loans often do. Cosigners are responsible for the loan if you are unable to make payments. The borrower and cosigner may face legal action if a cosigned loan is defaulted on.
- Consolidation of Loans – Multiple federal student loans can be combined into one loan with one payment. Private student loans cannot typically be consolidated without a new loan and new fees.
- Prepayment Penalties – Federal loans may be repaid at any time. Private loans may include a prepayment fee that discourages you from paying them off early. This forces you to pay interest for longer.
- Student Loan Forgiveness – There are multiple ways to qualify for full or partial student loan forgiveness for federal loans, such as public service loan forgiveness. However, it is unlikely that your private lender will offer student loan forgiveness.
Student Loan Repayment & Assistance
It’s essential to make on-time student loan payments regardless of the type. While student loan payments can be burdensome, federal and private student loans, have various options.
- Deferment– This temporarily postpones repayment of student loans while attending college at least half-time, while experiencing economic hardship, during periods of active military service, and other reasons. Under deferment, your principal and interest payments are delayed. Interest does not continue to accrue.
- Forbearance – You may temporarily postpone student loan payments for several reasons, including poor health or financial hardship. Under forbearance, interest continues to accrue.
- Standard Repayment – Student loan payments may be a fixed amount for several years. Both federal and private student loans use this type of plan. However, private student loans may periodically change payments based on a variable interest rate.
- Graduated Repayment – Student loan payments may start lower and then increase each year gradually. This allows you to advance your economic position in life as your payment increases.
- Extended Repayment – Student loan payments may be fixed or graduated, but the length of time to repay may be extended, essentially lowering monthly payments. This would also result in greater interest payments upon full repayment.
- Income-Based Repayment (IBR) – Student loan payments may be set according to your household income. If you start an entry-level job with lower pay, you will have lower payments. Those payments may increase as you advance through your career and receive a higher income.
- Pay As You Earn Repayment (PAYE) – Student loans may be based on 10% of your discretionary income. This may result in higher payments as your income increases like IBR plans. However, PAYE also considers your expenses based only on your discretionary income.
Most federal student loan servicers allow repayment according to these plans. However, private loan companies are not likely to offer as many. You may be able to defer or forebear private student loans for a shorter period, but once it falls into repayment, they may be even higher.
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Can a Lawyer Help with Student Loan Debt?
Yes. If you cannot repay, a student loan attorney can help you understand your options and give you methods to find relief from the collection tactics of student loan servicers.
Student Loan Collections
Many collection strategies used by student loan companies are harsh and often illegal. You have rights, and LHA will make sure they are respected.
Once your account goes into collections, lenders may begin assessing collection fees in addition to the loan principal and interest rates. Collection fees can add significantly to your balance.
If you get behind on payments, student loan companies may start calling, sometimes violating the Fair Debt Collection Practice Act (FDCPA). Under the FDCPA, student loan servicers may not harass you, call you repeatedly, use profane language, or make unnecessary threats.
Student loan companies are one of the only debt collectors that may garnish your wages without going to court first.
Income Tax Refund Acquisition
Student loan collection companies may intercept your income tax refunds and take all or part of them if you have failed to make payments.
Student Loan Lawsuits
If you fail to make payments and do not work with your lenders, they may file a lawsuit against you. However, if you are being sued for student loans, you may be able to fight back before the court date or in court.
Our Private Student Loan Lawyers Can Help
While federal student loans offer you more options for repayment, private student loans are rarely flexible. They handle defaults harshly and are quick to file a student loan lawsuit. If you have private student loan debt and fall behind on payments, you should contact an attorney.
An attorney can negotiate with the loan servicer to reach an agreement. They may even be able to get you complete relief from the debt if the lender cannot validate your debt or they don’t have the required proof of what you owe.
LHA Assists with Student Loans in Ohio
Student loan default can be scary, and you may be unsure about your options. LHA is here to help clients in all 88 Ohio counties.
- New Philadelphia
Call LHA Today: 888-726-3181
Initial Consults are Free and No-Obligation
Student Loan FAQs
Does the Type of Loan Matter?
Yes. The type of student loan you have, whether federal or private, makes a difference for issues like repayment options and types of relief that are available to you. If you don’t know what type of student loans you have, you can call your student loan servicer and ask them what types and options you have for repayment.
Who Is My Student Loan Servicer?
If you are unsure who is handling your student loans, you can find that information on the Federal Student Aid website. You will need to create an account with personal information such as your social security number, phone number, and email address.
Are Student Loans Discharged in Bankruptcy?
It is tough to get a student loan discharged in bankruptcy. However, it is possible if you can prove undue hardship or complete disability. Contact a licensed Ohio attorney to find out if this is an option for you.
My School Closed. Can My Student Loans Be Discharged?
If your school closed, it may be possible to get a complete discharge of your student loans. You will need to contact your federal student loan servicer to find out if this is an option for you.