Getting a college education is a huge expense, and many people have to take out extensive amounts of student loans in order to fund their continued learning. Unfortunately, not everyone can easily afford the cost of their student loan debt when the bill comes due, and sometimes the minimum payments combined with all of the many other mandatory living expenses can become too great of a burden to bear. When this is the case, you are said to be in a position of “financial hardship.” And while nobody wants to be in this situation, you could actually qualify for some relief if you find yourself there.
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When you are experiencing financial hardship, you have a few options you could use that may allow you to try to reorganize your life and get back to a point where you can feasibly begin to repay your loans.
Deferment
An economic hardship deferment is when you are essentially allowed to
freeze your loan balance for a certain period of time, up to three years.
For the duration of this period you won’t have to make monthly payments
and your loan won’t accrue any additional interest either. When
your deferment comes to an end, you can continue to pay again right where
you left off. These are usually granted in situations where you lose your
job, need to care for a child, or become disabled.
Forbearance
An economic hardship forbearance is a lot like a deferment, in that it
puts a “freeze” on your loan balance, only your interest continues
to accrue while you’re not making payments. This can add a substantial
sum to the cost of your loan, especially if you are granted a forbearance
early in your loan with a lot of outstanding balance. These are typically
granted for similar reasons to deferments.
Bankruptcy
Don’t count on being able to have your
loans discharged through bankruptcy—less than one percent of all borrowers qualify to have this happen.
This may only happen when your loans create “undue hardship,”
such as when you graduate, but then become disabled and unable to gainfully
work, severely limiting your income.
Do I Qualify?
Financial hardship is determined by the ratio of your debt to your adjusted gross income (AIG). When the annual amount due on all of your eligible loans exceeds 15 percent of your “discretionary income,” you are considered under financial hardship and could qualify for these options.
Visit our ever-growing Q&A site dedicated to answering the most frequently asked questions about student loans in New York.
For more information about settling loans due to financial hardship, speak to a student loan attorney today at (888) 301-0584.