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Student Loan Repayment
The MMI Online Articles are designed to inform, assist, educate and alert consumers.
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If you are having trouble paying for your education, waiting it out is not an option. There is no statute of limitations on government-guaranteed student loans, giving Uncle Sam unlimited time to collect. Fortunately, there are some options.
Telemarketing fraud caused losses of more than $1.7 million in 2003. Total Internet fraud losses equal more than eight times that figure. Obviously, you should steer clear of get-rich-quick schemes and suspicious “contests.” Unfortunately, thieves adapt as consumers become educated; fraud has seeped its way into more trustworthy covers including “charities,” credit repair, loans, travel, online auctions and work-from-home offers. Following are some ways to foil fraud:
-Consolidation. You may be able to consolidate several loans into one. Many consolidation loans offer students the opportunity to repay their loans over a 30-year period at a favorable interest rate. While consolidating your loans may decrease your monthly payments, keep in mind that increasing the length of time it takes you to repay may increase the total cost of repaying your loans.
-Deferment. You may request a deferment, or temporary suspension, from your lender if you meet certain criteria such as being unemployed or re-enrolled in school. If you have a subsidized Federal Family Education Loan (FFEL), Direct Stafford Loan, or a Federal Perkins Loan, you do not have to pay interest during deferment. However, if you have an unsubsidized FFEL or Direct Stafford Loan, you must continue to pay the interest. If you apply for a deferment, you must make all payments until it is granted; you can’t get any deferment on a defaulted loan.
-Forbearance. If you are not eligible for deferment, you may request a temporary suspension or reduction of payments. Forbearance can also be an extension of the time you have to repay your loan. Unlike deferment, interest accrues, and you’re responsible for repaying it, regardless of the type of loan you hold.
-Cancellation. Perhaps every student dreams of having their loans dismissed and, in some rare cases, it is possible. For example, your student loan may be cancelled if you become permanently disabled or if your school closes before you complete your program. Keep in mind that cancellations are not granted for financial difficulty.
Realize that ignoring your student loans only makes matters worse. To recover a defaulted loan, the government can withhold your tax refunds. The government doesn’t even need a court order to begin garnishing 10 to 15 percent of your wages. In addition, interest and collection fees can increase your balance significantly. For more information on student loan repayment, visit the US Department of Education’s website at www.ed.gov.
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