Lower Student Loan Repayment Obligations Through Federal Programs–Will They Lower Default Rates?

Understandably, students who graduate college with student loan debt obligations wish to avoid defaulting as this can start their financial life out in the red as defaulting on federal loans can not only decrease one’s credit score, but can cause other financial strains that could follow a student for years after they graduate.  Yet, lower student loan repayment obligations through federal programs have been implemented as a way to help these individuals avoid missing payments on their student loan obligations even if financial troubles are present in the life of the borrower.

There are concerns that more students are defaulting on these federal student loan debts either because they are simply in a position where they cannot meet their payments or they have gained such a high amount of debt on their loans that it could take years for them to repay what they owe. However, many federal student loans will offer forgiveness on student loan debts for both public service and nonpublic service workers who diligently pay on their loan for a set period of time. Obviously, public service workers may qualify for the shortest repayment timeframe before their debt is forgiven as these individuals could only have to make payments for up to 10 years on their debt before it is forgiven. Usually, traditional students who are not in a public service field can have their debt forgiven after 25 years of repayment, and both of these options can be greatly helpful for anyone who has acquired a high amount of federal student debt.

Also, students are being asked to explore options like Federal student loan consolidation plans and income-based repayment programs as these programs can also offer a lower monthly student loan repayment obligations as well. It’s understandable that many students are struggling to meet their repayment obligations on the federal debt due to the fact that they have entered into an unwelcoming job market and may either be unemployed or underemployed and not earning wages that will allow them to meet a traditional, minimum monthly payment on their student loans.

However, consolidating student loan debts of a federal student loan consolidation plan can not only offer a low interest consolidation loan on various debts, but it could also lower the monthly payment a student must meet on these outstanding debt obligations. Yet, students who are in a bad financial position, meaning the debt obligation they owe is quite high compared to their income, can qualify for these income-based repayment plans which will lower a student’s monthly payment obligation to only a small percentage of their income each month.

While the Direct Loans program typically services federal student loans, students can still contact this program and inquire about various opportunities or options that may be available for their particular debt situation. As an example, some students may have a mixture of private and federal student loan debts so some of these programs may be either unavailable or could cause the overall cost students must pay to increase, but student loan debt relief programs can offer more affordability on monthly payments, or students can also find advice to help them manage their student loan debt to avoid missing payments or simply defaulting on these federal loans.