Based on True Story: How to Get Out of Student Loan Debt

The student loan debt in the United States has reached an overwhelming $1 trillion. Adrienne from Alabama is just one of the 37 million student loan debt stricken individuals in the country.

And like Adrienne, these individuals are also in desperate need of help. These figures are screaming evidence that people need help in determining the best possible way on how to get out of student loans.

Before we go further you can have a glimpse on Adrienne from Alabama via this video.

Lets continue with our series…

Why Adrienne Obtained Student Loans

Like most young people, Adrienne who was born and raised in Alabama has always dreamed of going to college to earn her degree. She is the first child out of seven children.

With that many children sharing the family’s resources, there was just not enough to go around.  Her parents can barely support the family and she knew she had to work her way so she can earn enough for her college fund.

She was hoping to get a scholarship. Unfortunately, she did not get one.  But that did not stop her from pursuing her dreams. She managed to obtain a student loan and she was positive she can pay it off once she completes her education and lands a high paying job.

Student at Work

She went to a high profile university because she thought it will help her secure a job much easier. The problem is that the tuition and fees were quite hefty. To be able to cover her expenses, she applied for federal student loans.

She also thought obtaining private loans was necessary. Despite knowing that her debt is growing huge, she was confident that she has everything in control.  She thought she knew exactly how to get out of student loans.  While she was still in school, she knew organization and planning can help her through and so she laid out this plan to repay her debt.

Adrienne’s Game Plan on How to Get out of Student Loan Debt Fast

Organize and Budget

Adrienne knew that the first step to repaying her student debt is to get organized so that is what she did. She was working while she was still studying. And although, she only earned enough to pay for her essentials, she still managed to set aside a small amount for repayment.

She also kept track of her repayment options both from her public and private lenders. She was actually taking on an income based repayment plan. This plan allows her to pay only a certain percentage based on her income.

Consider interest reduction

In the long run, Adrienne understood a large chunk of her outstanding debt comes from interest charges.  Realizing this, she made an effort to get to know her options as far as interest rate reduction is concerned.

For instance, she knew most lenders favor direct deposit. As a matter of fact, borrowers who avail of this option for repayment are eligible to at least 0.25 percent reduction in their interest rates.

She was also paying on time consistently which helped her when she negotiated for a percentage reduction from the interest rate. And since she was also dealing with a couple of loans from both public and private lenders, she also considered a loan consolidation plan in an effort to reduce interest rate.

Take extra jobs

The only way she can earn more money is to work harder and juggle more jobs. Since she was still studying, she did not have much time to spare for other part time employment. But she figured she will be able to do so after college. She did manage to land some side jobs and it helped her pay off more of her debt.

Make frequent payments

As she managed to land a few gigs, Adrienne always made it a point to set aside some amount for payoff. This is on top of the payment she made monthly with her regular work stint as a student assistant.

Pay off the private loan first

Adrienne understands that it is much more difficult to deal with private lenders. So, she paid particular attention on how to get out of private student loan debt. She always made it a point to pay it off first whenever she had available funds to spare.

Consider public service employment

She heard about the Public Service Loan Forgiveness or PLSF Program. This involves the forgiveness of remaining Direct Loan balances. But to become eligible, she has to work full time in a public service or non-profit organization. She has to make at least 120 on time monthly payments and that was definitely doable for her.

Adrienne Carries out her Public Service Loan Forgiveness Plan

She was in cloud nine when she finally graduated and her parents could not be prouder. Adrienne had a tough time securing a job and she jumped at the first opportunity for employment although it did not pay that much. She remained positive that she could eventually pay off her dues and help her siblings through college eventually.

Like she originally planned, she sought a job from a non-profit organization. This is in line with her goal of qualifying for the Public Service Loan Forgiveness program.

Seventy percent of her student loan debt comes from federal direct loans. And she will have trouble paying it off unless she comes up with another way out. The PLSF program made her hopeful.

She knew she has to stay on as a full time public servant for 120 months or ten years to qualify for the student loan forgiveness. But she thought it was worth it since that would mean the remaining balance of her debt from the federal direct loan will then be forgiven or written off after ten years. Adrienne was convinced it is a smart plan. She was actually keeping track of her qualification status.

To further help with her cause of figuring out ways to pay off her student loans, she tried to take advantage of tax benefits. That is why she made it a point to deduct the interest from her student loans in her tax declaration. Using this method, she managed to reduce her tax liability by up to $2200, close to the maximum amount set as of 2013 which is $2500.

Adrienne Figures out How to Get out of Private Student Loan Debt

With everything going as planned for the Public Service Loan Forgiveness Program and as long as she keeps up with the monthly payments, her public debt may be forgiven sooner rather than later.

But she had a remaining 30 percent of student debt obtained from private lenders. She knew she needs to figure out a reliable game plan on how to get out of private student loan debt.

Adrienne’s Biggest Challenge Yet

Everything was indeed going well for Adrienne. She kept note of her original game plan on how to get out of student loan debt fast. And it seemed nothing can stop her from paying her student loan debt as planned.

But that is until she lost her job when the organization she was working for closed its operations. Now, she is at her wits end, worried about how to support herself and bothered by demands to pay off her unsettled student loan amounting to $375,000. And she is in a desperate need for a financial plan.

Adrienne Seeks a Solution

Adrienne has been out of work for two months now which means she is close to default. For her federal student loan, she is given 270 days or nine months until she is considered a default case. But she is more worried about her private student loan as lenders usually default in as short as 120 days or even earlier.

The worst part is that she is unsure about when she will be able to land another job given the difficult employment market.  Because of this, she is seriously considering letting her student loan go on default.

There are still options remaining for Adrienne. Defaulting may be the easier way out but that will not reflect favorably on Adrienne’s record and she is well aware of that. One of the things she is considering is bankruptcy student loan debt.

Adrienne Faces the Bankruptcy Option

Bankruptcy can be declared under two chapters. This includes Chapter 7 for liquidation and Chapter 13 for reorganization to figure out repayment. Most of the time however, borrowers are not granted discharge from student loan debt.

They are instead prompted to seeking a reorganization plan and this involves negotiating with the lender on a workable repayment plan according to the situation the borrower is currently in.

In filing for bankruptcy student loan debt, Adrienne needs to fulfill three basic rules and these are:

  • That she will be unable to meet even a minimum standard of living is she is forced to pay the debt
  • She needs to present proof that she is under a financial hardship and that she will continue to experience this hardship if she continues to be faced with the debt; and
  • Proof that she had been meeting her repayment obligations until the filing for bankruptcy.

The chances of granting a discharge for the request of bankruptcy student loan debt are rather slim. Moreover, this shall reflect on her record and may affect her chances of getting approved for future loans.

Adrienne’s Other Options

Another possible option that Adrienne can take is the deferred payment or forbearance due to economic hardship or unemployment. This involves requesting for a suspension of the payment until she gets back on her feet and recovers from her financial difficulty.

There are several criteria that Adrienne must fulfill in order to become eligible for this option. And this is one of the things she is trying to look into.

Student loan forgiveness is another possibility. The condition here is that Adrienne will have to work in a designated job and in exchange, the program will handle the payment of a certain percentage of the debt.

This is applicable to borrowers like Adrienne who are overwhelmed with repayments after they have started working. And this may be more suitable since she is still out of work.

Adrienne is just one of the millions of cases who are troubled by overwhelming student loan. The good news is there are plenty of programs and organizations that help troubled borrowers especially those facing a mountain of student loan debt.

The Student Loan Justice, for one,  is an organization dedicated to helping student loan borrowers recognize their options and determine the best possible approach to debt.

Student Loan Justice aims to help borrowers learn the basics of getting out of student loan debt fast as well as getting out of private student loan debt which can prove to be more challenging.

Borrowers who are behind payments are also assisted in figuring out the most effective ways on how to get out of student loan default.   This includes tips and assistance on proper negotiations with the lenders regarding repayment options.

Proposed Solutions Adrienne Can Hold On to

Adrienne can also seek help from the Consumer Financial Protection Bureau or CFPB. They offer reliable information from the Student Repayment Debt Assistance website that is designed to help borrowers determine the best options for coping with repayment.

In addition, there are pieces of legislation being proposed which can potentially help millions of individuals facing burdensome student loan debt. This is called the Student Loan Forgiveness Act.

The Act features a 10/10 Repayment Plan which is somewhat similar to Pay-as-You-Earn plan by President Obama. This includes a 10 percent cap on interest and forgiveness after ten years.

The Student Loan Forgiveness Act also proposes capping interest rates on federal loans to 3.4 percent. It also presents a modified version of the Public Service Loan Forgiveness program which only requires borrowers to make at least 60 instead of 120 monthly and on time payments for eligibility.

Also included in the proposal is a federal consolidation loan program that includes discharging private loans. And this is certainly beneficial for Adrienne and those like her who find it troublesome to figure out how to get out of private student loan debt.

What Can Adrienne Do in the Meantime?

In the meantime though, Adrienne has to take action before her problems become more difficult to manage. The point is that there are plenty of options than just giving up and letting the student loan go no default.

What Adrienne essentially needs is a financial plan and some expert guidance so she can understand how to get out of student loans despite her difficult circumstances.

It is important that she and the 36,999 other people like her realize that help is readily available. They just have to look in the right places.

What is your opinion on Adrienne?

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