America is in a student loan debt crisis. This means that 1 in 3 borrowers are also having difficulties repaying their student loans. You are not alone. Lawmakers are well aware of the college loan system having troubles, and programs are being implemented to rescue tired borrowers from completely turning away in hopelessness from their loan repayments. Default is an awful outcome. The decision you make today to not pay your student loans will bring heavy consequences for your financial future.

Have the courage to be ‘proactive’ on student loan problems

The most important first step is to absolutely let your lender know. As anxiety ridden the phone call might be, it is necessary if you wish to get help with those loans. Tell your lender upfront that paying is difficult. There is relief available. Each lender has its own rules, but will create a payment plan realistic to your own life situation. If you are suffering from a financial hardship, make it known from the start. You may qualify for deferment or financial hardship forbearance. While there are some downsides to these (such as interest accruing) it is better than sticking your head in the sand in hopes the loans will go away. Did you know you have the ability to change your loan repayment plans once a year?

Ask about payment plans

Sam Wilson of Texas Guaranteed Student Loan Corp., a nonprofit student loan disbursement agency says "Ten years is the standard repayment period on a student loan, But that doesn't mean that they have to make equal payments every month for all 10 years. Most students don't know that there are several payment plan options.”

The federal government currently offers four basic types of repayment plans.

Repayment plans for hard financial situations

  • A standard plan allows borrowers to pay the same fixed amount each month ($50 per month is the minimum).
  • The extended plan places payments from 12 years to 25 years (available only for students with loans equaling more than $30,000).
  • The graduated plan requires lower payments in the first initial years, and then the payments become increasing, every two years until the loan term is over.
  • An income-contingent plan sets payment amounts based on a percentage of the borrower’s annual income (anywhere from 4 percent to 25 percent).
  • An income-based repayment plan assigns monthly payments at 15 percent of the borrower’s discretionary income. This is defined as any earnings which are above the 150 percent of the poverty line.
  • After 25 years of payments, if a balance remains and the borrower still has little ability to see the loan through the loan is forgiven. The current poverty level for a single person is about $11,000.
  • The last option is to apply for a temporary interest-only repayment plan. Unlike the repayment options, interest-only plans are available only for a specific amount of time which is negotiated between the borrower and the lender.

Do not look away from loans and snowball your financial future. Communication is the key here. There is something for everyone’s student loan situation and more programs are coming. Remember one important concept—the federal government has exceptional collection powers. It is pretty well known they can and do pursue debtors’ right to the grave. Defaulting on student loans has lifelong extreme consequences. This means tax refunds; social security and any other government benefits are at risk. They can also garnish wages without a court order and do.

Student loans go into default after nine months. From this point they are sent to collection and released to a third-party collection agency. These debt collectors are ruthless and sometimes push the envelope on what is legal with threatening or aggressive behaviors. Aside from this, there are extreme penalties and fees, up to 18 percent can be charged. If you have significant assets, the federal government will look to sue.

Getting a college education is going to provide a better financial avenue for life. Student loans permit people to access this educational process when they otherwise could not afford it. The reality is hardships are going to happen. Life is so imperfect. However, these are the days to tackle the debt problem as it is happening. Student loan debt payment alternatives and relief are available. Asking for help does not make a borrower weak, it makes them wise. Choose to be brave, and save the stress not paying your loans will cause in the future.