default-loanConsequences of Defaulting on Student Loans

If your loan is in delinquency, that means you’ve failed to make a payment when it’s due. If you’ve defaulted on your loan, that means you’ve been delinquent for nine months or longer without making arrangements for either deferment or forbearance.

The Ramifications of Defaulting on Student Loans

Creative Ways to Pay Back your Student Loans

With living expenses and tuition costs climbing faster than a mountain goat on a mission, it’s no surprise, then, that we’ve seen students doing some pretty crazy things to help cover the cost of college or pay down the debt they have after graduating. Steve Stanzak, a student at NYU, couldn’t afford a dorm room so lived in the campus library for eight months. Two University of Colorado students cashed in on the party scene by starting a cleaning service to spruce up after house parties. One guy even paid for his living expenses by spending his free time disco dancing in the street, shaking his way to $10,000 a year.

But not everyone can tackle their debt by confronting their crazy, so what can you do to help pay down your own? The secret: get creative without getting silly. And one of the best ways to do that for students with federal student loans is to consider a federal policy called loan forgiveness, which cancels some or all federal student debt in exchange for certain types of service. The good news is there’s something for everyone, so if you have the time and the ambition to lessen your debt, consider the programs below:

Volunteer: Peace Corps, AmeriCorps, or AmeriCorps VISTA

Volunteering isn’t just a great way to see the world or give back to your own community, it’s a great way to help tackle your debt. The best part about it is that many volunteer opportunities offered through these programs cover travel and living expenses in addition to offering other great benefits, like loan deferment while in service, a post-service stipend, or an educational award that can be used to pay down your debt when you’re finished. Peace Corps volunteers receive $7,425 after their 27 months of service and qualify for partial cancellation of any Perkins loans (15% off for each of the first two years of service, 20% for each of the third or fourth years if you extend your service). And both AmeriCorps and AmeriCorps Vista volunteers can get up to $5,550 for the completion of 1,700 volunteer hours over a ten month program.

Serve: Consider military service

While each branch of the military has a host of financial benefits, and there are many military and veteran associations that offer scholarships to those who’ve served, you should also be aware that students who enlist in the Army National Guard can qualify for up to $50,000 in student loan repayments, which is helpful to those who’ve incurred debt before enlisting.

Teach: Opportunities for teachers

Full-time teachers with a passion for helping those who need it most—that means students from low-income families or special education students—and teachers who specialize in shortage areas like bilingual education, math, and science qualify for the partial or complete cancellation of Perkins or Stafford loans they have. Click here for more information.

Other opportunities

But the help doesn’t stop there! Other people who may qualify for partial or complete cancellation of their student loans include nurses and childcare providers. Check out the HRSA Nursing Education Loan Repayment Program for more information. Also for those employed in public service, the federal government will forgive any remaining debt after 10 years of full-time employment if you’ve made at least 120 payments. Check with your employer for eligibility.

 

Loans FAQ