Student loans have become a double-edged sword in recent years. While they make obtaining a college education possible for many who could not otherwise afford it, they can come back to haunt young people after graduation.
Federal student loans do come with many perks, including low interest rates and flexible options for repayment. One option, called Pay As You Earn, caps the amount borrowers are required to repay each month based on their income. This program has thus far been limited to relatively recent borrowers, although Wayne County residents may have heard news of President Obama's recent announced that eligibility for Pay As You Earn will now extend to older loans as well, bringing some relief to an estimated 5 million additional borrowers.
However, not all students make it through college -- much less graduate school or beyond -- on federal student loans alone. Private student loans are available to help where federal student loans fall short or where students are ineligible for them. But these private student loans do not have the interest rate and repayment benefits that federal student loans do; in fact, private student loans are unaffected by the president's latest efforts.
Wayne County residents struggling with student loan and other debt payments are not alone. Almost half of recent graduates are currently spending at least half of their income on debt, including student loans, credit cards, car payments, mortgages, medical debt and other debts. And these are the years when they are supposed to be building a financial foundation for their family and future.
Young Wayne County residents in need of a fresh start due to overwhelming debt do have a number of legal options that can provide them with some debt relief. Filing for bankruptcy, of course, is a powerful way to eliminate debt. Although federal student loans are generally not dischargeable in bankruptcy, other unsecured debts are, which can free up the resources to make those student loan payments regularly.
Debt consolidation plans are another option, although young people should watch out for potential scams with hidden fees and questionable benefits. A legal professional is a good resource for anyone with questions about how to cope with the financial challenges facing young people today.
Source: Time, "New Student Loan Relief Plan Leaves Many Out in the Cold," Liz Weston, June 10, 2014