Trapped by student loan debt?
Image Source: StockSnap.io
Student loan debt has grown drastically over the last few decades. Americans are borrowing more and more to get their degrees and are increasingly struggling to repay the debt. If your student loan debt is out of control, here is some information to get more affordable payments in 2017 and what to do if you simply cannot pay the debt.
How Bad Is the Student Loan Epidemic?
Currently, there is more than $1.28 trillion in student loan debt owed by more than 44.2 million Americans according to the Federal Reserve. The average monthly student loan payment is more than $350 for borrowers age 20 to 30, and the delinquency rate has climbed to 11%. More than four million borrowers are in default – the worst stage of delinquency.
Close to 75% of college graduates come out of school in debt. The average amount of debt is roughly $30k. For those that fall behind on their student loans and go into default, the consequences can be shocking. What’s even more stunning is that there are many student loan debtors still paying off college debt for themselves into their golden years.
The Power of Student Loan Debt Collectors
One important thing to realize when taking on student loan debt is, unlike any other debt, there is no statute of limitations. That means the debt is legally enforceable without end. It could follow you all the way to the grave if you don’t pay up as promised. What’s more, because the debt is owed to the federal government, they have great powers of collection.
In North Carolina, few creditors can use wage garnishment to collect what you owe, but Uncle Sam can apply garnishment to collect on delinquent student loans. In fact, they don’t have to take you to court to take a portion of your pay but will send a notice 30 days before the garnishment begins. This garnishment can haunt you all the way to your Social Security payments.
Other Tools in the Government’s Collection Arsenal Include:
- Acceleration – Once you go into default, your student loans are accelerated, meaning the entire amount is due all at once.
- Income tax refund seizure – The federal government can hold your income tax refunds until the entire student loan debt is paid.
- Treasury offset – In addition to taking tax refunds, the government can take other federal government payments you receive.
- Federal salary offset – If you work for the federal government in any capacity, up to 15% of your disposable pay can be taken.
How to Lower Your Student Loan Payments
Income-sensitive repayment plans are now available to most federal student loan borrowers. If you qualify, this can cap your loan payments at 10% of your disposable income based on a formula set by the government. Your payment plan under this option won’t last longer than 20-25 years. At the end of that period, remaining balances are discharged.
Lowering your taxable income can help you get lower student loan payments. This can be accomplished by earning less, but no one wants to do that, or by contributing more to your 401(k). If you’re planning on getting married and have student loan debt, be aware that your spouse’s income comes into play for income-sensitive repayment plans.
How Bankruptcy Can Help
If you can’t afford your payments because you have too much debt, that can be problematic. Debt collectors working for the federal government can still garnish funds without regard to your ability to pay your mortgage or car loan. Garnishment can create an untenable situation. In this case, bankruptcy may help. However, it’s atypical for student loans to be discharged in bankruptcy.
But by using bankruptcy to decrease your other debt, you may make student loan payments easier to deal with – or you may be able to have your debt lessened. If you’re partially or totally disabled, have a chronic illness that affects your ability to work or earn a low wage with no prospect of increase, there is a chance your debt may be discharged in part or in full.
To find out more about dealing with student loan debt via bankruptcy, contact the Law Offices of John T. Orcutt today. Call +1-919-646-2654 now for a free consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.