Student Loan Debt Piling Off – How Student Loan Debt Can Be Stopped?
The Department of Education just announced that it is extending the student loan relief program until the end of September. Initially, the administration announced student loan relief for students who are struggling with their college loans. Now, they have announced plans to extend the program for all students who need help with their debt.
What does this mean for you? For most students, this means that you will have more time to pay your debts and possibly get out of debt faster. The original announcement stopped payments on more than $120 billion in federal student loans already. It only took effect immediately upon implementation.
However, since the pandemic got worse and has yet to subside, many people still believe that the recession would surely behind it by the end of September. But as the months went by and the student loan relief program went into effect, many more borrowers saw that the program was actually good and worth their efforts. Now, with the extension, even more borrowers can enjoy benefits from this. If you are one of those borrowers, who are still waiting for the benefits provided under the new federal government laws, then you have waited long enough.
It is not difficult now to understand the reasons why the federal student loan debt relief program was implemented in the first place. The federal government badly needed money, so it began to pump it into the economy via various forms of indirect methods. This included additional educational funding for students and Pell Grants for parents. Both these forms of funding are meant to reduce the burden of student loan borrowers so that they will be able to afford the higher tuition costs.
As a result of all these indirect forms of funding, students no longer feel the pinch of the education expenses. They have money to pay their fees and they don’t have to worry about the fact that they are liable for paying back their student loan debts. However, this is not the end of the story. Many of these same students are now facing a different kind of problem: paying back the loan that they took advantage of when the economy was doing well.
There has been some positive movement on the part of borrowers. President Obama has offered student loan forgiveness to those who have borrowed loans in the past four years. And he has also offered this same forgiveness to graduates who are going to pay back their subsidized and unsubsidized Stafford loans after going through the service. However, many borrowers have found this pandemic relief quite difficult to avail. This is because the federal government has implemented a very rigid process when it comes to approving these loans to ensure that only very few borrowers are granted the relief.
One important requirement is for borrowers to be employed while they are studying. Borrowers who are unemployed will not be granted the relief. Another very strict requirement is for borrowers to have received notice of deferment or forbearance earlier than the year 2021. Borrowers can apply for the same through either the Direct Loan Consolidation or the Federal Family Education Loan Programs. Both these methods will qualify them for the same kind of relief.
When the borrower gets his/her federal loans consolidated, all monthly payments are consolidated into one single payment. Then, that payment is distributed to the borrowers as per their individual income and the amount of the loan. But the major disadvantage of this method is that the interest rates and the principal amount of the loan are consolidated. So borrowers must be really careful about their spending and must try to bring down their total outstanding amount. But with proper timely repayment of the loan, they can easily manage their debts and manage their financial situations in general.