Due to current economic conditions, recent college grads often find themselves responsible for making student loan payments before achieving the income levels expected when they took out the loans. It is not surprising, then, that many are seeking ways to defer or reduce payments.
Are student loans eligible for the new federal loan modification programs? The short answer is "no." Student loans are not included in recent federal loan modification programs. However, there are some practical equivalents of loan modification.
Loan cancellation, or "forgiveness," is available under specific circumstances such as disability, voluntary service, military service, or targeted employment. Forgiveness may not be available after consolidation, so consider this approach first.
Loan consolidation is the process of taking out a new loan to pay off several smaller loans. This means the protections, benefits, options, payments, and interest rates of the various loans end. A single new agreement takes effect. For this reason it is important to evaluate each loan under consideration for consolidation. It may be better to arrange two or more consolidation loans. For instance, if you have Perkins loans, these can be consolidated into one without losing the benefits and protections of the Perkins loan program. Private loans would then be consolidated separately.
A third option may be to seek extension of current loans. This may be a good choice if you have one or two large loans rather than several smaller ones.
Consider the options carefully, but act quickly--before student loan debt gets control of your future.
