Going to college is a dream for many Americans, and it can come at a hefty price: the average amount for tuition and fees for a four-year undergraduate degree now exceeds $33,000. These high costs have forced many students to turn to financial aid programs to fund some or all of their college ventures. The Federal Student Aid Department alone awards federal loan money to more than 13 million students every year. While it can be convenient to borrow the money you need for school, you must remember that you will have to pay back everything you get, with interest.
If you find repaying the money is not as easy as you’d hoped, you may want to get help from an Ohio federal student loan attorney to explore alternative approaches to affordable payments.
Private vs. Federal Student Loans
There are two different arenas that offer student loans: the private sector and the federal sector. Private loans are provided by banks and other private lenders, such as Sallie Mae. With higher interest rates, unsubsidized loans, and inconvenient repayment plans, private loans are not always the best option for students. However, if you cannot get enough funding from other sources to cover your school needs, you may want to consider a private loan. These loans don’t come with a specific cap, so you may be able to get as much money as is necessary to cover the gaps.
Federal loans are backed by the government and offer more perks to borrowers. The amounts depend on what type of aid you’re receiving, but in general, unsubsidized and subsidized loans make up much of the aid. Subsidized loans do not accrue interest while you’re in school and unsubsidized loans begin accruing interest the moment you receive them. Currently, students can borrow up to $5,500 in subsidized funds for the year, and up to $20,500 annually in unsubsidized loans. These loans have fixed interest rates that are generally lower than private institutions can offer. You aren’t required to pay back your loans until after you’ve left school or drop to part-time enrollment, and you’re given a number of repayment programs to choose from to ensure you can afford your payments.
Federal loans also have perks like deferments and forbearances – if you’ve hit a tight spot and can’t afford all your bills, you can request a forbearance to stop payments for a year. Keep in mind that interest will still accrue during this time period. You can choose to pay the interest only during your forbearance, or just wait and have it tacked onto your loan amount. You can apply for a deferment to postpone payments with no interest accrual for a certain period of time, but you have to meet special circumstances for this option. With a forbearance, you don’t have to meet any particular criteria.
Federal student aid can be repaid through a number of different programs, based on what you can afford and how long you want to pay them back. Many plans are available to all borrowers, while some plans have certain eligibility requirements you must meet. You can also consolidate federal student loans into one loan, which allows you to make one monthly payment that covers them all.
What Happens If I Default On My Loan?
Missing payments will make you delinquent, and forgoing payment entirely will put you in default. Defaulting on student loans can bring serious trouble. These loans are generally not discharged in bankruptcy, so failing to pay them damages your credit, racks up interest on unpaid amounts, and forfeits your access to benefits like different repayment plans and forbearance eligibility. You could face getting your loans turned over to a collection agency, have your wages garnished, or even be sued for nonpayment.
While owing this money can be stressful, it’s important to remember that student loan collection agencies cannot violate your rights when trying to collect from you. These agencies must adhere to the rules laid out in the Fair Debt Collection Practices Act (FDCPA), just like any other call center agency. That means they:
- May only call you between the hours of 8:00 a.m. and 9:00 p.m.
- Are no longer allowed to contact you if you send a letter prohibiting further contact
- Must send written verification of the debt no longer than five days after they first contact you
- May not harass you, make threats, or use false information to try to make you pay
If a student loan debt collector is harassing you or violating the FDCPA, you should speak to an attorney right away.
How an Ohio Federal Student Loan Attorney Can Help
If your debts are so extensive that you’re facing defaulting on your federal student loans, you should consider talking to a federal student loan attorney. At Cleveland Bankruptcy Attorneys, we have considerable experience helping people like you find a way out of their financial problems.