As of June 2013 the Consumer Financial Protection Bureau found more than 7 million student loan borrowers were in default on federal or private student loans, meaning they were more than 270 days late on a payment.
This is the economic reality of many recent and past college graduates who struggle to pay high-interest student loan bills, while seeking to raise families, purchase vehicles and buy homes.
Nita Gupta, an Indianapolis Student Loan Debt Attorney, said many people need help figuring out the big picture student loans play in their life.
āIām not a financial planner, and I tell my clients that, but they may have a specific goal at times where they may want to save up to buy a house or pay off another student loan debt,ā said Gupta. āI try to figure out what the clientās long term goals are financially and not just in regards to student loans but what else may be going on in their life.ā
In addition to decreasing credit scores, if student loan payments arenāt made, professional licenses can be taken away, including driverās licenses in 22 states, in addition to garnished wages. The U.S. Federal Reserve found more than 40 million Americans have student loan debt, amounting to roughly $1.2 trillion in outstanding debt.
The Indianapolis Recorder Newspaper called the Loan Consolidation Center at the U.S. Department of Education to find options for college graduates who may be drowning in debt from multiple student loan payments. After selecting the customer service center, our call was answered in about five minutes.
According to the customer service representative, there is no minimum amount of debt needed to consolidate loans, but all loans must be through the federal government and not through private loan providers.
Loan holders are able to consolidate their loans to create one monthly payment of federal loans, which can lower monthly payments by giving individuals up to 30 years to repay. However, depending upon which repayment plan is selected, loan holders may pay more interest over a longer period of time.
Repayment options include the standard, graduated, income based, extended and income contingent plans. Each plan is selected by the loan holder and estimates monthly payments and length of time until final payment.
Following is an overview of each plan:
Standard:
Payments are a fixed amount paid over 10 years
Graduated:
Payments are lower and then increase, usually every two years for 10 years
Extended:
Payments may be fixed or graduated for up to 25 years
Income based:
Maximum monthly payments are 15 percent of discretionary income, the difference between adjusted gross income and 150 percent of the poverty guideline for given family size and state of residence. Payments change as your income changes for up to 25 years.
Income contingent:
Payments are calculated each year and are based on your adjusted gross income, family size, and the total amount of Direct Loans. Payments change as income changes for up to 25 years.
The customer service representative stated it takes about 30 days for consolidation applications to process, however loan holders still have an obligation to the loan distributors until consolidation is complete.
22 states where unpaid student loans can lead to suspended driverās license:
Alabama
Alaska
California
Florida
Georgia
Hawaii
Illinois
Iowa
Kentucky
Louisiana
Massachusetts
Minnesota
Mississippi
Montana
New Jersey
New Mexico
North Dakota
Oklahoma
Tennessee
Texas
Virginia
Washington
Source: National Consumer Law Center.
For more information on student loan consolidation, visit Studentloans.gov.