Sense & Centsibility Blog
Financial Counseling
Student Loan

A Letter About Your Student Loans & Credit Cards from Your Financial Counselor

Monday, September 25, 2017 - 01:15

Dear Friend-

I am worried about your financial wellness.  You tell me you have student loan debt, credit card debt and not much money saved for retirement.

Have you been able to log onto StudentLoans.gov to look at repayment, forgiveness and deferment options for your federal student loans?  Have you talked with your servicer(s)?  If not, here are a few options to look into further:

PUBLIC SERVICE LOAN FORGIVENESS (PSLF)

To have your direct federal student loans forgiven under the PSLF you must make 120 payments towards your loans while employed full-time at a qualifying employer, working minimum work hours and making a payment through a qualifying repayment plan.

TEACHER LOAN FORGIVENESS

If you teach full-time for 5 complete and consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low income families and meet other qualifications, there may be loan forgiveness up to $5000 or if ‘highly qualified’ up to $17,500 on Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Student Loans.

DEFERMENT

You are eligible for student loan deferments only if you have not yet defaulted on your loans.  Deferment options for federal loans vary depending on the type of loan and date the loan was incurred. You can get the following deferments for most loans:

  • In-school deferments for at least half-time study;
  • Graduate fellowship deferments;
  • Rehabilitation training program deferment;
  • Unemployment deferment not to exceed three years;
  • Economic hardship deferment, granted one year at a time for a maximum of three years; and
  • Military deferment.

Have you made a plan to pay off your credit card debt?  Have you talked with an LSS Certified Financial Counselor about realistic options? If not, call us today at 888.577.2227 for your free session or click to GET STARTED ONLINE. Here are options to discuss with your financial counselor:

DEBT MANAGEMENT PLAN (DMP)

Pay your debts through LSS on this program that typically provides reduced interest rates and sometimes even a lower monthly payment. Not to mention, the DMP will help you pay off your debt in full faster, saving you even more money and helping you improve your credit.

SETTLEMENTS

Your creditors in collections may be willing to accept less than the current balance on the account to get the debt off their books. There are pluses and minuses to this process. The plus would be paying the debt off and possibly getting a payment reduction. The minuses would be that they would note it as a "settlement" on your credit report which doesn't help improve your credit and that remains on your report for up to 7 years. There may also be tax ramifications next year as the amount they write off on the debt could be considered income for you. NOTE: Never go through a company for debt settlement. They'll charge you fees for something you can do yourself for free.

BANKRUPTCY

This option means that your income is not enough to pay your basic living needs as well as pay back your creditors.  Debts can be discharged (chapter 7) or restructured (chapter 13) to protect you from garnishments, judgments, or freezing funds at your bank.  Student loans and IRS debts usually are not discharged in a bankruptcy. Be sure to get a free consultation from 2-3 reputable attorneys before choosing one.

Bankruptcy should be considered a last resort as this is the worst option for your credit. Also, timing is crucial; if you can't afford all of your living expenses and may fall into even more debt, it's best to wait to file until you have enough income to pay for your everyday expenses. Be sure to talk to a financial counselor to decide if bankruptcy is right for you.

Think About Retirement

Finally, when do you want to retire?  What is the minimally acceptable income you will need in retirement? While you need to work on paying off your debt, it's also important to think about the future. Take a look at these retirement calculators:

AARP Retirement Calculator (this is the only one that includes spouses)

CNN Money Retirement Calculator

Vanguard Retirement Calculator

Also, here are more blog posts to help: 3 Ways to Save for Retirement, Facing Retirement and Debt? You're Not Alone, and Can Debt Derail Your Retirement Plans?.

Please, Friend: make a plan to increase your financial wellness today.

Author Paige Best is a Certified Financial Counselor with LSS, specializing in budget, credit, debt, and student loans.