For most students, the only means to keep to this seemingly rising sea tide is by taking on more student loans. The result has proven to be skyrocketing average student loan debt across the past decade. There is a good reason for this though, because there has not been an increase in interest rates throughout the entire decade. This means that students are truly paying less for their loans than ever before.
So, how does one pay off these student loans with so much less each month? Loan repayment plans through the government have come together to offer some relief. One of the biggest such refinancing offers available today is loan forgiveness.
Loan repayment forgiveness allows borrowers to enjoy lower monthly payments as a result of federal student loans being repaid through a lump sum payment by the lender. Loan forgiveness allows the borrower to enjoy a one-time payment that is significantly lower than the combined payments owed on the original loans. This allows for quick payoff and does not call into question the borrower’s current ability to make payments. This plan has a limited time commitment; hence, the sooner the money is paid back, the better.
Loan consolidation through the federal government is another way to benefit from loan forgiveness. When a borrower refinances his or her federal student loans, the old loans are consolidated into one loan with the help of a new lender. The borrower then makes one payment to the new lender, who then pays off the old loans. The difference in the total payment is the borrower’s gain in repayment savings. The downside is that the borrower must start to repay the new loan immediately. Federal loans are some of the easier to obtain and qualify for; hence, the bigger the loan that the borrower takes on, the higher their chances of qualifying for a federal loan consolidation plan.
Loan consolidation and federal student loans also offer another option for borrowers. Loan forgiveness programs are made available to former servicemen who have been discharged from service due to serious misconduct such as desertion, discharge without notice, or any other serious crimes. These men are offered forgiveness and a payment plan where they pay an amount equal to the balance still owed on their loans monthly for a specified period of time. The advantage of this payment plan is that the borrower is able to pay lower monthly payments, which can go towards their living expenses.
Although all three plans are excellent ways for repaying debts, there are various pros and cons for each. A borrower can also opt for an installment payment plan wherein the monthly installments are spread out and paid on a semi-annual basis, biweekly, or weekly. Borrowers can choose to pay in lump sum amounts or in smaller monthly installments. They are given the choice to increase or decrease the payment grace period as per their financial capability. Whatever may be the plan borrowed, federal student loans offer great convenience to the borrower who is unable to make regular payments or meet other repayment requirements.