Are you one of the 44% of college students who has outstanding federal student loans? After graduating, it’s important to know what you need to do to keep your loan in good standing and to make sure it doesn’t go into default.
What are federal student loans?
The federal student loan program was initiated in 1965. In recent years, it has been the target of critics who argue that it is taking advantage of students and parents, with little accountability or transparency on the part of government officials. In fact, the Department of Education reports that more than 50 million Americans have taken out a federal student loan, with an average debt of $30,000.
The federal student loan is a loan that can be issued to students that are not eligible for most other types of loans. These loans don’t require the same credit qualifications and you don’t have to have a co-signer. They are available through the Federal Direct Loan Program.
How long does it take to repay a loan after graduation?
It can take up to 30 years to repay your student loan. After graduation, you will have to pay a minimum monthly payment of around $500. However, if you make more than this amount each month, the balance will be completely paid off in 10 years.
It will take anywhere from 10 to 25 years for your balance to be paid in full. Some students are able to complete their loan payments faster by reducing the amount of time between making payments, which can reduce the amount of interest that accrues.
What should you do if you default?
If you default on your student loans, you’ll be hit with a tax bill and might have to file a 1040 return. If you have to file, the only possible way to avoid it is if you qualify for the Public Service Loan Forgiveness program. If not, then the IRS will collect your tax refund, which has been withheld in full by the federal government. You’ll be required to make payments until your loan balance is paid off.
If you default on a federal student loan, the government can garnish your wages and seize bank accounts. There’s also a chance that you will spend time in jail. The worst-case scenario would be if the government took your property but since most people don’t own anything other than their home, it’s unlikely to happen.
Is there repayment assistance available for federal student loans?
In the event that you are unable to repay your federal student loan, there are options for assistance in repaying a portion of your principal and interest. These types of repayment programs include the government’s Incentive Forgiveness Program and its Income-Based Repayment Plan.
According to the Department of Education, there are several repayment options for federal student loans. For example, borrowers who have trouble making their payments can use income-based repayment plans such as income-contingent repayment, graduated repayment, and extended repayment. There is also loan rehabilitation that allows a borrower to have their loans forgiven if they work in public service after graduation.
If you’re a student, the chances are that you owe more than $26,000 on your federal student loans. If you don’t want to let your debts pile up without doing anything about it, then there are things that you can do to repay your loans, such as paying down the balance in full and re-establishing a payment schedule so that you won’t have to pay any interest on that outstanding balance.
There are lots of loans available for students, but federal student loans are the most popular. They’re easy to get and are typically the best option for those ready to repay their loans quickly. It’s important to understand how your loan interest rates work and what types of repayment plans you have available before you sign up for a loan.