College and University Blog
Default Prevention: Understanding Your Student Loan Repayment Options
Comparatively speaking, the pressures of college life and its level of responsibility when paired with the pressures of the working world are rather dulcet. Reality never seems to hit more bitterly when a graduate is faced with the combination of an unforgiving job market and the black cloud of astronomical college loan payments looming on the horizon.
This reality is not too far off for one recent college grad I know who graduated with almost $100,000 in student loan debt and a degree only worthy of a near collapsed industry. While other possible employment opportunities came up void, the discouraged graduate found himself six months later pushing carts at Wal-Mart for a meager $7.75 an hour and owing a lender $1,125 per month on his student loans, an amount that entirely exceeded even his gross income for a full month of work.
If you are a graduate who is being confronted by this type of circumstance, it is best to understand your options. Unfortunately, defaulting on your student loans is NOT an action that will be easy to correct in the future nor does it benefit the lender. Most lenders will be inclined to work out some sort of arrangement. Here are some options:
Loan Repayment Alternatives
If your payment does not fit into your monthly budget, your next step is to discuss with your lender other repayment possibilities.
Income Sensitive Repayment
The Income Sensitive Repayment program (ISR) is an option available to those who received loans through the Federal Family Education Loan Program (FFEL). The purpose of this repayment resource is to allow low-income borrowers the ease of loan remittance by lowering monthly payments based upon a fixed percentage of the borrower’s gross monthly income. However, the monthly payment must be greater than or of equal value to the amount of interest accumulated.
Borrowers must apply for ISR on an annual basis, providing proof of income, W-2