How To Avoid Losing Your Job If You Can’t Pay Off Your Student Debt

Forty-four million Americans hold a total of $ 1.3 trillion in student loan debt. According to Federal Reserve, the average amount of student loan debt is $ 32,731 and the average monthly amount owed is $ 393.

Of these borrowers, 19% are behind on their payments.

If you miss a payment on your federal student loans, you have 270 days to make a payment before your debt goes into default. More … than 3000 people by default on their federal student loans every day.

Once federal student debt is in default, the government is able to garnish your salary, Social Security check, federal tax refund, and even your disability benefits.

And as debt levels rise, creditors are taking increasingly extreme measures to entice borrowers to repay their debts. In 19 states, government agencies can even seize a business license if a borrower defaults on their loans. For many workers, no license means no work.

According to records collected by The New York Times, firefighters, nurses, teachers, lawyers, massage therapists, barbers, psychologists and real estate brokers have all had their professional titles suspended for defaulting on their student loans. These records show more than 8,700 cases in which workers have had their credentials revoked or suspended due to student debt in recent years.

The government began to use aggressive collection techniques like these in the 1980s. Some states would seize wages and others would put liens on the borrowers’ cars, homes, or both. Texas and Illinois were the first to use their power over professional licenses to motivate borrowers to repay their loans.

Several states, including Hawaii, Iowa, and Massachusetts, can legally use this method, but often choose not to, in part because people who can’t work can’t repay their loans.

Shannon Otto, whose nursing license was briefly suspended after falling behind on her student loan payments, at her home in Nashville, Tennessee on October 23, 2017.

Kyle Dean Reinford | The New York Times

Shannon Otto from Nashville, Tennessee had her professional license suspended by the Tennessee Board of Nursing because she defaulted on her loans while paying off medical bills related to recurring crises. In order to renew her license and return to work, Otto would have to pay $ 1,500 – a cost she cannot afford.

“I absolutely loved my job, and it seems amazing that I can’t do it anymore,” she said. The New York Times.

Debra Curry, a nurse from Georgia, also had her license terminated because she was behind on her student loan payments. She said Time, “It was traumatic.”

Debra Curry, whose nursing license was briefly suspended after falling behind on her student loan payments, at Piedmont Henry Hospital in Stockbridge, Ga., October 23, 2017.

Audra Melton | New York time

Today, Curry pays her creditors $ 1,500 a month for fear of losing her ability to work if she falls behind. “I really want to pay off the loans,” she says. “How do you think I’ll be able to pay him back if I don’t have a job?”

How to avoid the fault

In order to avoid falling into default, borrowers should make sure to choose a repayment plan that fits their budget. The government proposes eight different repayment plans that borrowers can choose to repay their debts.

Financial writer Janet Alvarez managed to pay roughly $ 100,000 in student loans over just six years by being aggressive and choosing the Income Based Repayment Plan.

“The cardinal rule about maintaining or improving your credit is the first thing I applied to my finances, which is that all of your debts are up to date,” she says. CNBC do it. “The student debt I immediately placed on Income Based Paydown, a federally sponsored program that applies to everyone [federal] student loans that scale your payments based on your income. So if your income is zero, you pay none. “

Not all borrowers can pay off their loans as quickly as Alvarez, but there are repayment plans that allow borrowers to pay off their loans over a longer period. the Extended repayment plan, for example, gives borrowers up to 25 years to repay their loans and allows them to choose whether their payments are fixed or progressive.

And before making decisions about funding a degree, students should calculate how long it will take them to pay off their loans and estimate how much money they expect to make after graduation. By staying organized and watching interest rates, graduates can make sure they repay their loans as efficiently as possible.

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