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What to Expect When You Have Debt in Collections

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When a debt goes unpaid, creditors often pass it off to a collection agency that will contact you in various ways in order to get you to pay up. Meanwhile, your credit score will take a significant hit when you default, limiting your access to new credit. Here is a closer look at what you can expect when a bill lands in collection, as well as how to dispute collections for money you don’t owe and how to work with an agency to eliminate the debt.

What is a debt collection agency?

A debt collection agency is a company that collects past-due funds from borrowers on behalf of creditors. Some creditors use an internal collections department or subsidiary, while others will send your account along to an outside agency if your bill is in default, or considerably overdue.

Once a bill is sent to collections, the collection agency will contact you for payment and you’ll no longer hear from your creditor or be able to pay them directly. The agency will then work to recover unpaid funds in exchange for a portion of your payment.

It’s likely your bill won’t suddenly end up in collections. Instead, you’ll hear from your creditor multiple times and over three or four months before your account is finally turned over to collections. However, it’s also possible for a debt to be sent to collections without notice because creditors are not required to inform you. This is sometimes a complaint with medical bills.

What to do if a debt collector contacts you …

  • Don’t share personal information until you’re sure you owe money.
  • Ask for identifying information, like the collector’s name and address, as well as the amount of the debt. Verify both are legitimate to avoid a debt collection scam.
  • Determine how old the debt is, such as by asking when the last payment was made. If the debt is beyond the statute of limitations, it is considered time-barred, which means you can’t be sued for it.
  • If you don’t believe you owe the debt, dispute it in writing within 30 days.
  • If the debt is yours, negotiate a payment plan or lump-sum payment for all or a portion of the debt. Get the agreement in writing.

What it means when your debt is in collections

Your debt goes to collections after your creditor has repeatedly failed to get you to make payments. The agency will then step up efforts to contact you, and you’ll start receiving calls and letters, sometimes persistently.

Here’s a timeline of what to expect when you’re late paying bills:

What happens when you’re late on payments
Days your payment is overdueWhat happens
0-30Your creditor will likely contact you to let you know your payment is past due. You may also be charged a late payment fee.
31-60Your creditor will report your missed payment to the major credit bureaus, possibly causing your credit score to drop 90 to 110 points.
61-90After two missed payments, you’ll likely be charged a penalty APR on credit card debt.
91-120Your creditor may enlist the help of a debt collection agency and also report a default on your account. This can drop your score another 50 points.
120+By now, your debt will likely be in collections. The debt collection agency may threaten to garnish your wages or take you to court, depending on the laws in your state.

Letting a debt go into collections can have a devastating effect on your credit score. However, the drop will also depend on how much other negative information is in your credit history. If you have excellent credit, you might see your score drop to as much as 150 points. If your score is already low, you’ll likely see less of a drop.

Like most negative credit information, collection accounts can stay on your credit report for up to seven years. However, paying off a debt in collections won’t necessarily improve your score. That’s because some lenders — like mortgage lenders — still use older scoring models when assessing your eligibility for credit. Unlike newer scoring methods, older methods keep a record of negative collection information even if the debt has already been paid off.

Your rights during the collections process

You have certain rights when it comes to how debt collectors can behave. For example, by federal law, collectors are required to send you a debt validation letter within five days of contacting you. The letter needs to detail the amount owed, the name of the creditor and how to dispute the debt. If you receive a letter like this — and don’t think the debt is legitimate — you have 30 days to challenge it in writing.

As you’ll see below, federal law also gives you the right to request in writing that a debt collector stop contacting you. A collector is exempt from this requirement only if they need to inform you of an impending lawsuit or if they’re stopping efforts to collect your debt.

The Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is designed to protect consumers from unfair and deceptive practices by debt collectors. It covers most debts, other than business debts, and sets forth rules for how and when a debt collector can contact you.

Under the FDCPA, debt collectors cannot …

  • Contact you between the hours of 9 p.m. and 8 a.m.
  • Contact you at a location you’ve indicated is inconvenient, like your workplace
  • Harass you with threats of violence, obscene language or excessive contact
  • Falsely threaten arrest, legal action or repossession of an asset like a car or home
  • Claim to be an attorney or government representative
  • Lie about your debt or how much you owe
  • Add interest charges or fees not allowed in your state or specified in the contract with your creditor
  • Garnish wages without a court order
  • Sue you for time-barred debt that has passed the statute of limitations in your state
  • Inform others about your debt unless it’s your spouse, guardian or attorney

If a debt collector violates any of these rules or any laws that apply to debt collection in your state, report their behavior to the following …

Under the FDCPA, you also have the right to sue a debt collector in court as long as it’s within a year after the violation. If you win, you might be compensated for any distress you experienced, as well as any wages you might have lost. Keep in mind, however, that suing a debt collector for illegal behavior doesn’t necessarily erase any debt you might have owed.

How to dispute debt in collections

If you have been contacted about a debt that you do not believe is yours, follow these three steps:

  1. Send a written dispute letter. Do this within 30 days after a collector first contacted you. In your letter, ask the agency to stop contacting you unless it can provide proof that the debt is legitimate. You can use this sample dispute letter from the CFPB.
  2. Keep a copy for your records. Always keep a copy of your dispute letter in case you need to go to court.
  3. Wait for verification. By law, your debt collector needs to stop contacting you until it verifies the debt in writing. At the very least, the verification you receive should list the amount and date of the debt you owe, along with the creditor’s contact information.

How to pay a collection agency

Pay in full

The most straightforward way to handle a debt in collections is to simply pay what you owe. You won’t need to negotiate, and it might improve your credit faster than some of the options described below.

Coming up with a lump sum might prove difficult, however. If that’s the case, you may need to:

  • Ask a friend or family member for financial help: To keep your relationship intact, draw up a repayment plan.
  • Tap your savings or retirement account: Consider these options only if you think you can rebuild the account once the debt is paid off. If you’re behind on debt that is not in collections, you may want to prioritize it in order to avoid further damage to your credit.
  • Use a debt consolidation loan: This type of personal loan lets you pay multiple bills with a single monthly payment at a fixed rate and over a fixed term. If you have weak credit and cannot qualify for a traditional debt consolidation loan, consider a secured loan, which is backed by an asset you own, like your car.
  • Consult a nonprofit credit counseling agency: An agency can help set up a debt management plan, which might let you pay off your debt over time. If interest or fees have piled up on your debt, a counselor may also be able to negotiate a lower rate or help waive fees.

Once you’ve paid off your debt to a collection agency, you can expect the agency to stop calling you. You can also expect an amendment to your credit report to show the collection account was paid in full. Check your credit report to make sure your information was updated.

Negotiate a payment plan

It’s likely your debt collector may offer you a payment plan that lets you pay off your balance with fixed payments over a fixed period of time. If this option might work for you, get an agreement in writing, and make sure your account will be reported as “paid in full” once your last payment is in.

if your debt is old, be cautious with a payment plan. Time-barred debt means you are no longer legally obligated to pay it because it is past the statute of limitations in your state. However, making even a single payment might reset the clock and allow a debt collector to take you to court for the full amount you owe.

Settle the debt for less

If you’re short on cash and don’t qualify for a loan, a debt settlement will let you repay the owed debt for less than the total amount. Debt settlement can be harmful to your credit, however, so ask the debt collector to have any negative information related to the debt removed from your credit files as part of a debt settlement agreement.

What happens if you ignore the debt?

If you ignore a debt in collections, a debt collection agency will continue to contact you, and your failure to respond may cause their actions to escalate. With time, a collection agency might threaten to have your wages garnished or take you to court. With a court order, a collection agency might also be able to take money directly from your paycheck or bank account.

That’s not the case with time-barred debts. For this reason, if your debt is old enough and cash is tight, it might make sense to wait until you are no longer legally liable for it. The caveat: If your debt were to get sold again — possibly to another collection agency — a new collection account might appear on your credit report.

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Consumer Watchdog, Pay Down My Debt, Personal Loans

Should You Avoid LendUp? A Review of Its Loans

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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personal-loan_lg-e1469273811143

Updated October 25, 2017
Update: On Sept. 27, 2016, the Consumer Financial Protection Bureau ordered LendUP to pay more than $3.6 million in fines for allegedly misleading customers about its online lending service. Read the full CFPB order here

In a nutshell, the CFPB claims LendUP’s parent company, Flurish, Inc., misleadingly advertised its lowest-priced loans. LendUP advertised its loans as available nationwide, yet the most attractive loans were only available to customers in California, the agency says. 

The CFPB also claims  LendUP failed to accurately market the annual percentage rates offered with its loans and in some cases understated the true APR on its loans. 

What does the CFPB’s order mean for LendUP customers?

The CFPB has ordered the company to pay about $1.83 million in refunds to over 50,000 consumers. Consumers are not required to take any action. The company will contact consumers in the coming months about their refunds, the watchdog says.

In response to the CFPB’s claims posted on its website, LendUP says the transgressions date back to the company’s early days. “When we were a seed-stage startup with limited resources and as few as five employees. In those days we didn’t have a fully built out compliance department. We should have.”

Lendup LendUp is a company offering a better alternative to the typical shady payday loan. Its aim is to disrupt the payday loan system by providing consumers with more affordable loans, more education, and transparency.

This is quite a change from storefront payday lenders, who have confusing policies that often leave customers paying more huge amounts in interest.

LendUp wants to reform the payday loan industry by helping its customers get out of debt and build credit.

However, it could come at a hefty price for consumers. Payday loans are known for outrageous APRs, and while LendUp has more reasonable APRs than typical payday loan companies, it’s still something to be aware of.

Who Should Use LendUp?

Before we get into the details of the loans offered by LendUp, it’s important to address who should avoid its loans and who should consider them.

Payday loans are typically short-term loans to tide you over if you need money in between pay periods. The term can be one week, two weeks, or one month long. That’s a big difference from other personal loans that have terms of 1 to 5 years.

It comes down to your personal situation, and what you’re looking to use the money for.

If you have damaged credit or no credit at all, then payday loans might look like the only solution. LendUp can help you, but it’s important to consider the price.

If you’re simply looking to build credit, there are much better options out there. Taking a payday loan should be one of your last resorts. You can only start to build credit via LendUp when you reach Platinum or Prime status, which requires you to take on multiple loans.

Each time you borrow money from LendUp, you’ll be paying a significant amount in interest. For example, even if you only borrowed $100 for 31 days, you’d still pay $24.40 in interest (287.29% APR), according to their calculator.

For that reason, if you have poor or no credit, it’s better to look into opening a secured credit card, or trying to get approved for a store card. There’s no reason to pay $24 in interest if you don’t have to.

If you have severely damaged credit and are unable to get approved for any other solution, or you’re in dire need of cash to afford necessities like food, then you should consider LendUp over going to a regular payday loan store. LendUp is certainly the better option.

That said, if you’re looking for a long-term loan, or looking for more cash for a big purchase, then LendUp is not the right choice. You should check out the other personal loan lenders we’ve reviewed, such as SoFi*, Payoff*, and Upstart*.

How Does LendUp Work?

LendUp Ladder APRLendUp is a completely new solution to payday loans. It has what it calls the “LendUp ladder,” which is a point-based system. When you show that you’re a reliable customer and can make timely payments, you’re rewarded points, which enable you to climb up the LendUp ladder.

Update: In a consent order issued Sept. 27, 2016 the Consumer Financial Protection Bureau claims LendUP misleadingly advertised its loans as available nationwide. However, the most attractive loans, which customers were told they could earn access to through LendUP’s “Ladder” rewards program, were only available to customers in California. 

You can also earn points by watching LendUp’s educational courses on credit and for taking loans with them.

Climbing up the ladder gives you different statuses. You start at Silver, and from there, you can advance to Gold, Platinum, or Prime status. Each status has better terms, and at Platinum and Prime status, you can report your payments to credit bureaus to build your credit.

LendUp also doesn’t allow rollovers. That means if you’re unable to pay back your loan on time, LendUp will not charge you a fee to extend it, as other payday lenders do.

Instead, it offers free 30-day extensions on loans, so if you’re unable to make a payment, all you have to do is log into your account, and choose the option to extend your loan. LendUp tries to work with its customers as much as possible to ensure they’re getting out of debt, not back into it.

According to its website, LendUp is also the “first and only licensed direct lender with a relationship to the major credit bureaus.” LendUp emphasizes that there’s no middleman involved when customers take a loan, which allows LendUp to maintain its transparency.

LendUp Loan Details

Terms vary based upon the status you have with LendUp and you can get a loan amount of $100 – $1,000 depending on your tier.

Silver starts you off with a minimum loan amount of $100 and a maximum of $250. The terms range from 7 to 31 days. The maximum loan amount offered is $1,000, accessible at Prime.

Screen Shot 2015-03-27 at 5.57.58 PMLendUp provides a helpful calculator on its front page that gives you an idea of what you can expect with different loan amounts and terms.

For example, if you want to borrow $250, the APR range is 209.75% (30 days) to 755.03% (7 days).

According to ResponsibleLending.org, the typical two week payday loan as an annual interest rate ranging from 391% to 521%. LendUp falls within that spectrum.

Unlike payday lenders, LendUp rewards customers for continuing to borrower. LendUp does offer rates as low as 29% to its Prime customers, which is great when comparing against other payday loans. However, we’d prefer you focus on building your credit score and look to establish a line of credit with a credit union or get a personal loan from lender with better terms.

LendUp payday loans are also currently offered in only the following states: Ohio, New Mexico, Washington, Maine, Oklahoma, Louisiana, Florida, Texas, Wyoming, Alabama, Idaho, Indiana, Illinois, Mississippi, Oregon, Kansas, California, Missouri, Tennessee, and Minnesota.

LendUp is working on increasing its presence throughout the United States, but since its a direct lender, its has to comply with individual state laws and policies.

LendUp Application Process

The application process is fairly straightforward. LendUp says it should take 5 minutes or less to fill out the application and you’ll get an instant decision.

LendUp offers standard next day funding, instant funding, and same-day funding (Wells Fargo customers only). It warns that if you take instant or same-day funding, you’ll have to pay a fee to cover the cost.

LendUp offers a no credit check payday loan option. To qualify, you just need an active bank account and proof of income.

It assesses applicants on much more than just their FICO scores, which comes as no surprise. Throughout its site, LendUp makes it clear it wants to lend to those with bad or nonexistent credit. Like other personal loan lenders, LendUp uses its own algorithm consisting of different data points to determine whether or not to extend a loan to an applicant.

The Fine Print

LendUp states it doesn’t have any hidden fees, but as with any payday loan, you need to read the fine print.

First, fees and rates are dependent upon the state you live in, so make sure to review state specific information here.

The only fee that’s mentioned with a dollar value attached is a non-sufficient funds fee. LendUp automatically takes money out of your bank account, and if you don’t have enough money in there to cover it, you’ll get hit with this fee, which can be between $15 and $30.

Additionally, if you want to pay before your due date, you can pay with your debit card, but you’ll incur a fee to cover the cost of the transaction.

Opting to get your money instantly or same-day also comes with a fee.

What happens if you can’t afford to pay and you used your extension? This is a common concern among those already tight on money. On its site, LendUp says to contact them at the first sign of trouble. It’s willing to work with borrowers.

However, if you don’t pay, and you don’t contact LendUp, then there are consequences. LendUp can suspend your LendUp account, send your account to outside collection agencies, take legal action, and report your account delinquent to the credit bureaus.

Commendable, but Still a Payday Loan

LendUp’s mission is a commendable one – it wants to educate its customers and provide them with a better way to get back on their feet. LendUp is certainly an improvement over traditional payday lenders, but at the end of the day, it’s still a payday loan. When taking one, you need to consider the overall costs you might face.

Look into secured lines of credit or store credit cards – don’t look to take a payday loan first. Only take one if you desperately need the cash and you’re in a rough spot. Be aware of exactly what you’re getting yourself into, and make every effort to pay off your loan on time and improve your financial situation.

If you’re interested in looking into a loan with LendUp, use its site map to get specific information related to the state you live in, as loan terms vary depending on state.

*We receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.  

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The Truth About ‘Obama Student Loan Forgiveness’

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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Source: iStock

The average 2016 college graduate carries $37,000 worth of student loan debt today according to an analysis of student loan debt by Mark Kantrowitz, publisher of Cappex.com. Kantrowitz tells MagnifyMoney he expects that number to rise for 2017 graduates.

It’s no wonder that those drowning in debt can get desperate. And scammers have come up with a clever way to dupe these borrowers into spending money on services that promise to erase their debt. One of the most popular student loan scams today involves companies that charge borrowers to sign up for the so-called “Obama Student Loan Forgiveness” program.

The only problem is that there is no such loan forgiveness program.

The truth about “Obama Student Loan Forgiveness”

So-called student “debt relief” companies use “Obama Student Loan Forgiveness” as a blanket term for the various flexible federal student loan repayment programs implemented over the last decade by the Bush and Obama administrations.

What they don’t tell unwitting consumers is that these programs, which include income-driven repayment plans and Public Service Loan Forgiveness, among others, are free to borrowers and do not require paying for any special services in order to enroll.

Promising relief to indebted college graduates, these companies lead people to believe that enrolling in these programs requires special assistance — which they may offer for a sizable upfront fee and/or recurring monthly payments. Rather than getting the help they need, borrowers are duped into paying for something they could easily accomplish for free with a simple phone call to their student loan servicer.

While there are multiple ways you can get scammed by debt relief companies claiming to offer you “Obama Student Loan Forgiveness,” there are some red flags that can help you spot a scam.

6 ways to spot a student debt relief scam

It’s important to note that it’s not illegal for a company to charge a borrower to enroll them in a program that’s free to them. These companies are arguably taking some of the work out of getting enrolled, even if that “work” could easily be accomplished with a phone call to your student loan servicer.

Nonetheless, some debt relief firms take things a bit too far, and it’s important to be aware of scams out there. After all, student loan forgiveness scams are really only one part of a broad range of debt relief scams. Debt relief scams share many of the same qualities and employ similar tactics to mislead consumers into paying for their services.

Here are some red flags to watch out for:

  1. They ask for fees upfront. By law, debt relief services are not allowed to ask for payment until they have performed services for their customer. A legitimate debt relief service may ask for a fee upfront, but they will place that payment in an escrow account, and they will not officially receive the payment until they complete the work.
  2. They charge fees for free government services. This one is a bit tricky. So long as a company makes it clear that it is possible to gain access to a government debt relief program for free, it’s not illegal for them to charge consumers for their help in enrolling in those programs. However, the worst actors out there will keep that information to themselves, leading consumers to believe they need to pay a professional for access.
  3. They claim to be affiliated with the U.S. Department of Education. The Department of Education, which manages the federal student loan system, does not partner with any debt relief services. Any company claiming to be associated with the Department of Education is a scam.
  4. They “guarantee” that your debt will be forgiven. Services will try to entice customers by promising total loan forgiveness or a reduction in their student loan payments. But monthly payments for borrowers enrolled in federal student loan repayment programs are established by law and cannot be negotiated. Also, the legitimate loan forgiveness programs out there usually require making payments for several years, and there is no company that can promise loan forgiveness unless you meet those payment requirements first.
  5. They advertise “pre-approval” for debt relief programs. There is no “pre-approval” for federal income-driven repayment or loan forgiveness programs. They are free for borrowers, and so long as your loans are in good standing, it’s a matter of the types of loans you have when you took them out that qualifies you for the different programs. To see if you qualify for a given program, contact your loan servicer directly.
  6. They offer to make your student loan payments for you. You should be the only person submitting payments to your loan servicer. The Department of Education has contracted these loan servicers to manage federal student loans, and loan payments should be made directly through their websites. Never send your payment to a debt relief firm, even if they promise to pay your loans for you. The exception here is if you’re working with a debt relief firm to settle a debt with a lump-sum payment. In that case, they are legally required to hold your cash in an FDIC-insured account until they officially settle the debt. And if their client decides they no longer want their services, they have to return the funds to them in full.

Do your due diligence before working with any debt relief service, by keeping an eye out for these red flags, as well as checking sites like the Consumer Financial Protection Bureau, the Federal Trade Commission, or the Better Business Bureau for complaints against the company.

What to do if you’ve fallen for a student debt relief scam

If you’ve been scammed by a debt relief company, there are certain steps you need to take to prevent further financial damage. However, know that it is possible you may never get your money back.

Submit a complaint to the Consumer Financial Protection Bureau and the Federal Trade Commission. Reporting scams, can not only help others from losing their money, but if an investigation by the CFPB or FTC results in suit and judgment, then the debt relief company may be required to issue refunds, cease business, and ensure borrowers do not miss out on important repayment benefits.

Track your credit reports with all three credit bureaus to ensure your personal information is not used fraudulently. You can get one free credit report each year at annualcreditreport.com or use these free services to monitor your report for suspicious activity. If you fear a debt relief scammer has your Social Security number and other financial information, you might want to consider a credit freeze. That will stop anyone from being able to open a new line of credit without you knowing.

Contact your loan servicing companies and have any power of attorney authorizations removed. Some companies will ask borrowers to give them power of attorney so they can negotiate directly with their loan servicers. You don’t want to leave any company with this privilege because they will be able to make decisions about your loans without you knowing.

Contact your bank or credit cards to stop payment to the debt relief company and see if they can work with you to try and get your money back. It is common for debt relief services to charge monthly recurring fees for their services.

Change your Federal Student Aid password. Every federal student loan borrower has a unique login for the https://studentloans.gov site, where you can track all of your federal loans. If you gave a company your FSA information, consider that information compromised and change your FSA password immediately.

9 Legitimate Student Loan Forgiveness Programs

While there is no such program called “Obama Student Loan Forgiveness,” there are several legitimate student loan repayment programs that offer student loan forgiveness.

These programs have a wide range of requirements and payment terms, some as short as five years, others as long as 25 years, and can be available based on the types of federal student loans you have as well as your chosen career.

In addition to loan forgiveness programs, there are programs that offer loan repayment assistance or loan discharge. How much can be discharged and the amount of repayment assistance varies greatly depending on the program.

9 examples of legitimate loan forgiveness programs, loan repayment assistance programs, and loan discharge programs

Program

Qualifications

How to apply

Max. loan amount forgiven

More info

Federal Teacher Loan Forgiveness

Teachers must complete five consecutive years of teaching at a low-income (Title I) school.

Application

Up to $17,500 in federal loans can be forgiven after five years.
Forgiven debt is not considered taxable income.

Studentaid .gov

MagnifyMoney’s guide to teacher loan forgiveness covers state programs as well as federal.

Public Service
Loan
Forgiveness
(PSLF)

Must work in a qualifying public service job, be enrolled in an income-driven repayment plan, and make 120 on-time payments.

Reserved for students who graduated after Oct. 1, 2007.

Contact your loan servicer and submit a Public Service Loan Forgiveness Employment Certification Form each year.

Total remaining balance, plus interest

Studentaid.gov:
PSLF

Income-Driven
Repayment

Eligibility depends on the types of loans, when the loans were borrowed, and whether they were borrowed for undergraduate or graduate programs.

Contact your loan servicer. Submit an IDR Plan Request with proof of income to each of your loan servicers

Outstanding balance after reaching end of repayment term is forgiven.
Note: forgiven debt may be considered taxable income.

Contact your loan servicer directly.

Military Service

Upon enlistment you agree to a minimum term of service and enroll in the military branch’s loan repayment program.
Most of the programs offer to pay one-third of the eligible amount for each year of service.

Be sure to discuss your eligibility for loan repayment programs with your recruiter and request enrollment as soon as possible.

Varies by branch.

Army and Navy offer a maximum of $65,000.
The National Guard offers $50,000, and the Air Force offers
$10, 000.

The program only applies to federal loans. There are a few exceptions for greater amounts depending on occupation. For example, a dentist could earn up to $120000 of loan repayment assistance, and an Air Force Jag Officer could earn up to $65,000 toward student loan repayment.

Americorps

Upon completing a term of service in one of three approved Americorps programs, you are eligible for the Segal Americorps Education award that can be used to pay current student loans or for educational expenses later on.

Apply to Americorps and if accepted, complete 12 months of service.

Currently, the total maximum you would be able to receive is $11,630. But students can complete the program twice, earning double the amount of forgiveness.

This education award would be considered taxable income.

The award must be used within seven years of completion of your Americorps service.

National
Institute of
Health (NIH)
Loan
Repayment

US citizens with federal or certain private loans in good standing working in qualified research programs such as a doctor (M.D., Ph.D., and other doctoral degrees) whose education debt exceeds 20% of their annual income can apply for either extramural or intramural NIH Loan Repayment Programs.

Determine which of the five Loan Repayment Programs best applies to your situation and submit your application and any required supporting documentation during the open application period.

$35,000 a year, with award terms that are either two or three years depending on the program.

In 2017, applications for all of the programs opens September 1, 2017, and have various closing dates with the earliest being November 15, 2017.

Loan
Repayment
Assistance

States or schools may offer these programs to those working in public service or under served rural areas.

Check with each individual program. For those working in a health related field you can learn more about repayment assistance programs here.

Lawyers, you can visit the American Bar Association Website to find out what states offer loan repayment assistance.
Those with a law degree can learn more about repayment assistance offered by law schools here.

Depends on the program

-

Closed School Discharge

If a school closes while you are enrolled or closes within 120 days of your withdrawing, you could qualify for 100% discharge of your federal student loans.

Contact your loan servicer(s) to get the application for discharge.

100% of federal student loans

Make sure you keep your loans in good standing by continuing to make payments while you wait to hear back on your discharge application.

Disability Discharge

If you are totally and permanently disabled and can establish that under the specific requirements of the program you could have your federal student loans discharged.

Must submit proof of your disability.

There is no cap on the amount that will be discharged.
Discharged debt may be taxable.

-

What to do if you can’t afford your student loan payments

If you are struggling to afford your student loan payments, there are some actions you can take to ensure your loans remain in good standing and you avoid a default that could negatively impact your credit score.

Enroll in an income-driven repayment plan

If you are unable to afford your current payment, you can apply to change repayment plans. For example, if you are on a Standard Repayment Plan for your federal student loans, you could request to enroll in an income-driven repayment plan. If you are already on an IDR plan and your income has changed significantly, you can request to have your payment amount recalculated.

Ask for a deferment or forbearance

If you are going through a temporary financial hardship, you can ask your loan servicer to apply a deferment or forbearance, which would not require you to make payments during the deferment or forbearance. While both a deferment and forbearance offer you relief from making payments, with a forbearance you will be required to eventually pay back the interest that accrues during that time. Also, it’s important to note that while you are in deferment or forbearance, you aren’t making payments, which means you might be missing out on forgiveness programs like PSLF if you are working in public service or for a nonprofit.

Consider refinancing or consolidating your loans

Refinancing involves taking out a new loan from a private lender and using that loan to pay off your old loan. The pros of refinancing include a reduced interest rate and the ease of having just one payment. If you refinance a federal student loan, you will lose all of the benefits that federal student loans offer.

Alternatively, you could consolidate your federal loans. A Direct Consolidation Loan combines all your loans using the average weighted interest rate into one loan. So instead of dealing with multiple loan servicers and multiple loan payments each month, you only have one student loan payment to make each month. You can apply for a Direct Consolidation Loan at no cost through the government’s Federal Student Aid website.

Work with your loan servicer

If you have private loans, your lender may not offer as many repayment options as federal loans. Reach out and work with your lender anyway. They may offer a financial hardship program that would lower your payments. Your loan servicer would much rather work with you to ensure they get paid.

Consider bankruptcy if you can pass the “hardship test”

While it is highly unlikely you will be able to discharge your student loans in bankruptcy, it isn’t impossible. You must either show that your loans would impose an undue financial hardship that will not go away or that the loan was not a qualified student loan in that it did not fit the definition or was in an amount that exceeds the school’s cost of attendance. An example of where this argument has been successful would be a private bar loan, a loan taken out to cover the expenses of taking the bar exam.