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How can student debt default be prevented?

Many students in Wisconsin, and the rest of the nation, finance their educations with a student loan. However, after graduating into the workforce, many are left without a job, or a job that pays less than they had expected. Because of this and other reasons, student loan defaulters have now become a serious cause of concern for the United States of America.

Delinquencies in student loan repayment may result in grave repercussions. The lender can recover the money using every legal means necessary. But many times federal lenders or other private lenders of student loans may agree to modify a loan payment program in case the student remains unemployed after finishing his or her education.

There are various methods of loan repayment available. Under the standard form of loan repayment, the highest monthly installments are levied. This leads to an early repayment of the loan, which, in turn, leads to a smaller total amount being paid in the long run, due to decreased amount of interest accruing. A graduated repayment of the loan is another method. In these cases, a smaller monthly installment of the total loan can be paid at the beginning of the repayment period, but the payments may become very large toward the end of the loan period. A repayment plan known as "income based repayment" has gained popularity recently. This loan repayment is calculated against the income of the student, which may vary. If the student falls on hard times, and any kind of repayment become difficult, he or she may defer the payments and put the repayment on hold. In extreme cases, the student may attempt to discharge his or her loans through bankruptcy. This is, however, a difficult option under the existing legal system. One needs to prove that repaying the student loan would put such financial burden on the student that it rises to the level of "extreme hardship." It usually depends on the discretion of the court who vets such claims against income, age, expenses etc. of the individual. Seeking professional help in such cases may be necessary. Furthermore, under certain situation such as the death of the borrower or permanent and total disability, loans may be canceled in their entirety.

Source: FindLaw, "The FindLaw Guide to Student Loan Debt," accessed on Aug. 14, 2014

Source: FindLaw, "The FindLaw Guide to Student Loan Debt," accessed on Aug. 14, 2014

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