College students today face an array of hurdles when they graduate. Not only do they have to compete in a tough U.S. job market, but many have to figure out how to pay back their student loans.
After graduation, the government gives students 6 months before they are required to pay back their loans on a 10 year repayment plan. In many cases, this amounts to a mortgage payment. Many students, unable to find a job or pay back such a high monthly payment, are forced into default-and further and further into debt.
There are programs available to help borrowers struggling to pay back student loans, but they can be confusing and aren't exactly conspicuously advertised.
Fortunately, the National Association of Student Financial Aid Administrators, the Young Invisibles, and three other student-loan-advocacy groups hope to change this. They have collaborated and proposed ways to streamline the repayment methods for student loans so borrowers can avoid student loan default.
The plan: automatic IBR enrollment
First, the groups propose an automatic IBR enrollment for student loan borrowers. IBR, referred to as income-based-repayment, is a government program that helps student loan borrowers struggling to make high monthly payments. It allows students to pay back their loans over a time period and monthly amount that is based on their income.
Upon graduation, students are automatically set up on a 10 year repayment plan, regardless of their income. The groups suggest that all borrowers automatically get enrolled in the IBR program post graduation.
Variations of the IBR program proposed include an 18 percent monthly student loan payment of a borrower's income over the first $25,000 that a borrower earns. Or, the groups recommend borrowers pay a 10 percent monthly student loan payment of their earnings over the first $10,000 they earn.
Further plan: automatic deduction
Further, along with an automatic income based enrollment, the groups propose that the amount is deducted automatically. Once a borrower's timeframe and monthly amount is determined through the IBR program, his or her monthly deduction would automatically be taken out of a paycheck or bank account.
The groups suggest this deduction to streamline the process and minimize the chances of default.
How a bankruptcy attorney can help
Given the skyrocketing costs of tuition, the amount a student borrows to pay for school will likely only go up in the years to come. The average student loan debt of a typical graduate today is over $20,000.
In the meantime, students struggling to pay student loans or simply make ends meet should consult with a bankruptcy attorney. An experienced bankruptcy lawyer can offer advice on how to obtain financial relief of student loans or avenues that can relieve the financial pressure.