Student Loan Amortization
13. If the rational for excepting student loans from discharge is that the cost to students to obtain loans would soar this fact would seem to lay waste to that argument. In the wake of the slow march towards saddling our students with unshakable debt the government created a couple of ways to deal with government backed student loans outside of bankruptcy. In 2007 the College Cost Reduction and Access Act of 2007 added income based repayment which allows for a smaller repayment than income contingent repayment 15% of discretionary income and debt forgiveness after 25 years. 14. In 2010 the Health Care and Education Reconciliation Act of 2010 created a new version of income-based repayment cutting the monthly payment to 10% of discretionary income with debt forgiveness after 20 years. 15.
The debt from any co-signed loans will also remain on your credit report as an open obligation until the debt is repaid (or written off in the event of a default). 4 Tips for Protecting Yourself as a Co-Signer on a Student Loan So should you co-sign on a student loan? You can never predict the future and unfortunate circumstances can derail even the best-intentioned and responsible student borrower. If you do decide to co-sign on a loan (or any other loan for that matter) make sure you clearly understand what your responsibilities are and under what circumstances you would be expected to take over the note: 1) Have a firm understanding with your primary borrower about the repayment plan -- you may even want to consider putting a signed written agreement in place between the two of you -- and stay in contact with the lender to make sure that the monthly loan payments are being received on time and as agreed. If your primary borrower misses a payment date contact her or him immediately to discuss the problem.
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With the unemployment rate soaring toward 10 percent and the average starting salary for college graduates down 2.2 percent this year student loan borrowers - whose average debt from student loans tops $22000 - are now having an even tougher time affording their student loan payments. The good news? Starting July 1 2009 graduates with federal college loans may be able to qualify for a new government program that can reduce the monthly payments on their student loans based on their income. Income-Based Repayment for Federal Student Loans The income-based repayment program created by Congress in 2007 as part of the College Cost Reduction and Access Act will cap a borrowers monthly student loan payments at a percentage of her or his income when the borrowers income is at least 50 percent higher than the current federal poverty line for the borrowers family size.
If your primary borrower starts missing payments or payment due dates however the lender will contact you. Normally by the time the lender is contacting you the loan youve co-signed is already past due and your credit rating may have already taken a hit. Keep in mind too that any legal remedies a lender has at its disposal for pursuing a loan debt can also be applied to the co-signer. These legal remedies include assignment of the delinquent loan account to a debt collection service and a possible court action. For delinquent federal education loans the government may seek to garnish your wages or seize any income tax refunds you have coming your way. In addition delinquencies or a default on any loans on which youve co-signed will appear on your own credit report with all the same adverse effects as on the primary borrowers credit report.