Tricks on how to manage your federal student loans:
This blog and these posts are all about how you can most
effectively manage your delinquent (or possibly soon to
be) federal student loans using tricks and tips not
advertised to borrowers.
First, what exactly do you want to accomplish? What sounds
most like your situation?
1.) You are behind on payments and your becoming more
delinquent and you just need a couple of months to catch
up and resume payments.
2.) You are behind on payments and your becoming more
delinquent and you might need up to a year to catch
up to catch up.
3.) The payments are just too high, but you are willing
to pay what you can afford.
4.) You are swallowed by massive debt and you have no
plans or reasonable expectation to ever pay them off
and just want the calls to stop and/or stop them from
making bad reports to the credit reporting agencies.
Second, what options do I have for each scenario?
A1.) Call your servicer and ask for a verbal forbearance.
If you are out of forbearance time, ask about a deferment.
If they couldn't pre-qualify you for a deferment, go to A2.
A2.) Call your servicer and ask for a deferment. If they
we not able to pre-qualify you, hang up and try again later
asking for one of these options:
a.] Unemployment Deferment
b.] Economic Hardship Deferment
c.] Debt Burden Forbearance
a.] This Deferment is very easy to get approved and
comes in increments of 6 or 12 months, and can be used for
up to 36 months. All you have to say is that you are
unemployed (or working under 30 hours per week), looking
for full-time work, registered with an employment agency,
and not turned down work because you are overqualified.
b.] This Deferment is not as easy to obtain because
you have to provide some supporting documentation with it,
but there is a flaw that you can exploit to obtain the
deferment anyway. You qualify if you receive public
assistance, or you work over 30 hours per week and make
under 150% of the federal poverty level at your family
size. While you will have to provide proof of benefits
- such as an award letter for the public assistance OR
pay stubs for proof of income and working hours- there is
no proof needed for FAMILY SIZE, which the other half of
the scale that determines if you fall within that 150%
poverty level. The higher your family size, the higher
your income can be while still qualifying for the
deferment. And "family size" means differently from
what you might think in regards to this deferment. That
number also includes all people that live with you, who
receive more than 50% of their support from you, in
addition to your spouse and children. Family size also
includes UNBORN CHILDREN. So if you say you're expecting
octuplets, you won't have to prove it, and it'll raise
the income threshold for your income for this deferment.
The following post is the deferment scale...
c.] This type of forbearance is generally your
last hope to postpone payments. Unlike the Deferments,
interest will not be paid by the government while on it,
and you'll rack up heavy costs from capitalization. I
suggest if you're REALLY in a bind, just say you have
zero taxable income so you don't have to provide proof
of income documentation. The government doesn't pay
anything during the forbearance period, so they most
likely won't check up on this in the least. The
servicer just has to, by law, give you the forbearance
if you request and qualify for it.
A3.) They have reduced repayment plans available that
might extend the length of the repayment period to up
to 25 years, but are relative to your income and
family size. It's very reasonable. It usually comes
to around 10% of your adjusted gross income. If you
qualify for a lowered plan and still can't afford it,
then you probably have over-extended yourself
financially in other areas of you life as well. Time
to downgrade and move out of your luxury apartment
and sell your ride for a compact. If it would still
be unaffordable after significant downgrading, try
declaring bankruptcy. Contrary to popular belief,
student loans can be discharged in certain conditions.
In the very least, bankruptcy can put the loans on hold
and the judge can alter the amount you pay and he can
take into account all your debts and bills, and come
up with a reasonable monthly repayment figure.
A4.) Some servicer’s like Navient offer options like
auto-pay, where you agree to let them debit your
checking account for monthly payments and they give
you what's called a "Courtesy Forbearance" that
will bring you current and give you another month
before those payments begin. These specific types
of forbearance's ARE UNLIMITED, and they will give
them as long as say;
a.) The payments moving forward are affordable
b.) you agree to the terms of the forbearance.
c.) YOU have a checking or savings account with
your account and routing numbers in hand.
I would then do one of two things;
a.) Log into the online account with the
servicer and cancel the auto-debit permissions
before the next payment date. Then simply
reapply every month before the due date for
another courtesy forbearance.
b.) Opt out of overdraft at my bank, including
reoccurring payments. Just re-enroll when they
start bothering me again.
1.) Try consolidation of your federal student loans to get back your forbearance and deferment times used.
2.) Just say screw it and let it go into default.
You can move to a state like Texas that bans wage
garnishment, or move out of the country to were it
isn't going to be enforced as easily. That way you
don't have to worry about federal and state tax
return interception.
