exchange for paying your student loans, you must work for a federal agency for a set period of time, usually three years. To learn more about this option, visit www.opm.gov or call 202-606-1800.
There could be some help on the legislative front. The College Cost Reduction and Access Act of 2007 (H.R. 2669) was passed by Congress and signed into law by the president in late September. The bill includes an Income-Based Repayment program modeled after the Project on Student Debtâ€™s Plan for Fair Loan Payments. Among the billâ€™s features:
Past, present, and future students with federal loans would be assured that their student loans would always be manageable, based on their income and family size.
Additionally, the bill would lower interest rates on subsidized Stafford loans to undergraduates, from the current 6.8% to 6.0% starting July 2008, 5.6% in July 2009, 4.5% in July 2010, and 3.4% in July 2011. In July 2012, rates would revert to 6.8%.
Lastly, the new legislation provides loan forgiveness for public service. Anyone with federal student loans who works at least 10 years in public service professions and makes income-based payments through the Direct Loan program would have any remaining loan balance completely forgiven after 10 years. “Itâ€™s definitely worth looking into loan forgiveness opportunities, especially if you are working in the public arena, for the nonprofit sector, or in a government position,” Shireman urges.
In retrospect, Gambrell says she could have minimized her student loan burden by about $3,000 by pushing to get subsidized loans (for which she was told she didnâ€™t qualify) or by paying the interest on those unsubsidized loans while she was still in school. Nevertheless, Gambrell has devised a written plan and timeline to knock out her student loansâ€”as well as her other debts. “Iâ€™ve always been into budgeting and being financially savvy,” she says. “My goal is to have the student loans completely paid off within seven or eight years.
Stay Out of Default
If you absolutely canâ€™t pay your student loans, investigate whether you qualify for loan forgiveness or loan cancellation programs. Who can get their loans forgiven or outright canceled? In most cases, police officers, lawyers, teachers, nurses, doctors, and many in the healthcare field. Volunteers at organizations such as Vista or the Peace Corps, or who help those in underserved communities, can also have their student loans written off.
If you inquire about these options and donâ€™t qualify for loan cancellation, do not default on your college debt. Defaulting on a student loan is a big no-no for many reasons. For starters, youâ€™ll hurt your credit standing. Youâ€™ll face stiff penalties, late charges, and possible collection feesâ€”which will only add to your debts and to the amount of time it will take to pay them off. Additionally, youâ€™ll make yourself ineligible to receive any future loans, a big concern if youâ€™re trying to finish a degree or go to graduate school. Also, student loans have no statute of limitations, which means the federal government gives lenders the right to come after