The student loan debt crisis has been grabbing headlines for years across the country. By June 2020, over 44 million Americans held $1.6 trillion in combined student debt, according to an article on CNBC. Several factors are the culprit here. The rising cost of higher education, high interest rates, and high default rates have all contributed to this ballooning figure for decades.
Living with student loan debt is stressful. Studies have proven that the financial strain of these loans can lead to stress, anxiety, and depression in borrowers. If you are facing a similar predicament, know that you are not alone. Individuals at every level of employment in the country are struggling with student loan debt related to higher education. At the same time, you also need to know that there are ways to help you get out of this debt trap.
Consider Debt Consolidation
College is expensive, and parents and students opt for student loans, both from private lenders and the government for higher education. Consolidating your student loan debt means that all your loans will be combined into a single loan. You will get new terms for monthly payments, which can ease the load. There are many things to consider here though, such as types of loans, your interest rate, and repayment tenure. For instance, if you have taken federal government loans with fixed rates, you can choose the Direct Consolidation Loan Program, according to information from the Federal Student Aid, a part of the US Department of Education.
File for Bankruptcy
For years, experts have argued that discharging student loan debt through the bankruptcy route is not a viable option. But this narrative is changing. Research shows that 50% of the times, people have been able to get some or all of their student loan debt erased through bankruptcy, according to an article on NPR. In the recent decision Homaidan v. Navient, the Second Circuit court held that certain private student loans could be discharged, reflecting a growing trend in the courts.
There is no special type of bankruptcy law for student debt, but individuals can file for Chapter 7 or Chapter 13 and then proceed on to file an “adversary proceeding” to have their loans considered for discharge. Sometimes, the filing of case in bankruptcy will make it easier for the student loan borrower because with the discharge of the credit card and medical debt, the borrower will have greater resources to pay the student loan. Talk to an experienced bankruptcy lawyer to see if filing bankruptcy may be an option for you in your particular situation.
Pay Down the Principal
If you have a high-paying job or if you have managed to save some money, you can consider tackling your student loan debt by paying off the entire principal whenever possible. The quicker you reduce the principal amount, the less interest you will need to pay. Alternatively, if you can pay a larger portion of the loan debt off now, the lower principal amount each month can lead to lower interest payments.
Other options include the American Rescue Plan, a part of President Biden’s $1.9 trillion stimulus package, which includes provisions for student loan forgiveness.
When you reach that point where your student loan debt is causing significant harm to your mental health it is important to address the situation as soon as possible, and it is necessary to consult an expert to weigh your options. Bankruptcy is a viable option for some, but not all individuals with overwhelming student loan debt. Research well and consult a skilled bankruptcy attorney to make an informed decision.