Student loan interest rates are expected to take a big hike this summer, but not if Wisconsin Senator Tammy Baldwin can help it. The Senator is urging her constituents to send in their personal stories about their student loan debts that she will pass on to Congress in hopes of halting the increase. Wisconsin residents overwhelmed with student loan payments should keep the various forms of debt relief in mind.
In just the past 10 years, the nation’s student loan debt has grown from $200 billion to $1 trillion. On July 1, 2013, the interest rates on federal subsidized student loans are slated to increase from 3.4 percent to 6.8 percent. While the president has proposed keeping the 3.4 percent interest rate for at least a few more years, Republicans in the U.S. Senate have blocked that request. Some recent graduates are contemplating moving back home with their parents, some have forfeited buying new cars and some making a decent middle class income have forfeited home ownership due to massive student loan monthly payments.
Student loan debtors facing financial challenges may have some options that can reduce or temporarily freeze their monthly payments. Under the average repayment plan, student loans monthly payments are calculated to repay the full loan in 10 years. However, if these monthly payments are unaffordable, debtors can extend the life of the loan in order to reduce their monthly payments. Some debtors may qualify for repayment plans based on their income. In those cases, after 25 years of payment, the remainder of the loan is forgiven. In cases where debtors have little or no income, options such as forbearance or deferment can be exercised to temporarily suspend payments in increments of up to six months at a time. In the case of a deferment, the interest rate will also freeze but interest continues with forbearance.
Wisconsin student loan debtors who are facing overwhelming financial challenges have several options for reducing or freezing their student loan payments. In cases where a debtor is still financially overwhelmed even after exercising those options, Wisconsin debtors can consider filing for bankruptcy in order to free up more monthly cash to pay their student loans.
Source: The Cap Times, “Plain talk: We cannot afford to ignore student debt,” Dave Zweifel, May 22, 2013