Student loans continue to be a problem, both for borrowers and for the economy as a whole. A recent report from the Federal Reserve indicates that while most types of credit are seeing mostly on-time payments, student loans have seen an increasing number of delinquencies.
The last quarter of last year experienced an 11.3 percent rate of delinquencies, which was a higher rate than other types of household debt, such as credit cards, mortgages or auto loans.
Part of the increases is that the fourth quarter would have been the first time many borrowers would have first been required to make a loan payment after their graduation last summer. This suggests that many may not have jobs or may have such low paying jobs that they are unable to afford to make their initial loan repayment.
Student loan borrowers should look to requesting some other repayment plan than the default plan. A Pay As You Earn or a plan tied to their income could lower the payments to an affordable amount.
Recent students, and current students, for that matter, should understand that most federal student loans are not dischargeable in bankruptcy, except in the most dire circumstances. This means you should develop a repayment plan that enables you to manage all of your expenses and debt.
If you are not recently out of school and have struggled with employment and loan repayment for years and neither have improved, you may potentially be a candidate for an “undue hardship” discharge.
If you have other debt, like credit card, that may be dischargeable, you may still be able to use a bankruptcy to lower your overall indebtedness to the point where repayment of your student loans may be possible.
Forbes.com, “Student Loan Delinquencies Continue To Rise Despite More Options For Borrowers,” Robert Farrington, February 26, 2015