Lana Oconnell
Student loan debt is a significant concern for many, and seeking help is a responsible step. While some resources are free, such as contacting your loan servicer, reviewing your credit report, and general credit counselling, more tailored advice may come at a cost. With the resumption of collections on defaulted student loans, it's crucial to understand your options and act promptly. This includes exploring repayment plans, considering loan forgiveness, and, if necessary, seeking legal advice or student loan-specific counselling. While these services often charge a fee, they can provide valuable assistance in navigating complex financial situations. The key is to research reputable providers and avoid debt relief companies promising quick fixes.
| Characteristics | Values |
|---|---|
| Whether to pay for student loan debt counselling | Some services are free, but personalized help may be worth paying for if your situation is complex and the provider is reputable. |
| How much it costs | Likely at least $50 for an initial session, and at least $250 for a more intensive plan. |
| How to find a counsellor | Search for a counsellor trained by a respected organization such as the National Foundation for Credit Counseling. |
| What to do first | Contact your loan servicer to understand your repayment status and options, and review your credit report. |
| What to avoid | "Debt relief" companies that promise immediate student loan forgiveness. |
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What You'll Learn
Free vs. paid services
When it comes to managing student loan debt, there are a variety of services available, some of which are free and others that come with a cost. It's important to weigh the benefits of both options to make an informed decision.
Free services include resources provided by the federal government and private lenders. Your loan servicer should be your first point of contact for assistance. They can help you understand your repayment status and explore options like deferment, forbearance, or hardship programs. Additionally, you can access your free credit report from AnnualCreditReport.com to review for any errors or signs of delinquency. Some organizations, such as GreenPath, offer judgement-free help from certified counselors. General credit counselling, which covers basic budgeting techniques, is often provided at no cost as well.
On the other hand, personalized services from credit counselors and legal professionals typically come with a fee. Certified nonprofit credit counselling agencies may charge a fee for their services. For instance, a session with a student loan counsellor to develop a personalized repayment plan could cost at least $50. More intensive assistance as you execute your plan may start at around $250. If your situation is complex, paying for specialized help may be worthwhile, provided the provider is reputable. Bankruptcy lawyers, for example, can advise on whether filing for bankruptcy could impact your student loan debt or repayment terms.
While free services can provide valuable information and guidance, they may not offer the same level of personalized attention and tailored strategies as paid services. Paid services can be particularly beneficial for those with complex financial situations or those seeking intensive support throughout the repayment process. However, it's important to exercise caution and avoid "debt relief" companies that make grandiose promises of immediate loan forgiveness. Legitimate student loan help organizations will not proactively contact borrowers with offers of debt resolution.
Ultimately, the decision to opt for free or paid services depends on your unique circumstances and the level of support you require. Free services can offer a solid starting point, providing essential information and resources. However, if your situation demands more tailored advice and ongoing guidance, investing in paid services from reputable professionals could be a worthwhile consideration.
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Loan forgiveness
There are multiple programs that offer student loan forgiveness for counselors and mental health therapists. These programs are put in place to encourage individuals to enter and stay in the profession.
The federal government offers student loan forgiveness for counselors and mental health therapists through the Public Service Loan Forgiveness (PSLF) program. PSLF provides complete student loan forgiveness on the remaining student loan balance after 10 years of service and 120 qualifying payments. Any amount forgiven is tax-free. Counselors and therapists working for nonprofit facilities or schools are good candidates for PSLF. However, it's important to note that it requires a long time commitment, with 10 years of paperwork and payments.
Other options for loan forgiveness include the National Health Service Corps (NHSC) Loan Repayment Program, which offers student loan debt relief to eligible healthcare professionals who agree to a two-year service obligation in a Health Professional Shortage Area (HPSA). The NHSC and HRSA offer shorter terms of service for loan forgiveness compared to PSLF.
It's important to be cautious of for-profit debt-relief companies that promise immediate student loan forgiveness or charge fees for services like consolidation or enrollment in a payment plan. These steps can often be done yourself for free. Legitimate student loan help organizations will not contact borrowers directly with offers of debt resolution. Instead, you can contact your federal student loan servicer through your My Federal Student Aid account or reach out to your private loan servicer directly to explore your options.
Additionally, there are income-driven repayment plans that can lower your monthly payments to a percentage of your income. After 10 to 25 years of payments, you may be eligible for forgiveness on the remaining balance. These plans are free to apply for on studentaid.gov.
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Default and consequences
Defaulting on a federal student loan has several negative consequences that individuals should be aware of. Firstly, if you haven't made a payment on your federal student loan for at least 270 days (9 months) and haven't entered into an agreement to postpone your payments, your loan is likely in default. During this period, your loan servicer must make diligent efforts to collect the loan.
Once your federal student loan goes into default, you may face a range of consequences. For instance, you could lose out on your tax refund or Social Security check as that money may be applied to cover your defaulted loan. Credit reporting companies are also notified, which typically leads to a lower credit score for you. This can impact your future ability to access credit and affect areas such as renting an apartment or taking out a mortgage.
Additionally, if you are in default on a federal student loan, you may not receive additional federal student aid until you take the necessary steps to bring your loan out of default. This can hinder your ability to continue your education or pursue further academic opportunities.
To assist borrowers in default, the U.S. Department of Education offers the Fresh Start Program, which is a one-time initiative to help get loans out of default. The Department also urges borrowers to contact the Default Resolution Group to discuss repayment options, enroll in income-driven repayment plans, or sign up for loan rehabilitation.
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Repayment plans
If you're struggling with student loan debt, there are various repayment plans and strategies that can help you get back on track. Here are some options to consider:
Federal Student Loans
Federal student loans offer a range of deferment, forgiveness, and repayment plan options. While it can be time-consuming to navigate these options, there are resources available to help. Nonprofit organizations, such as MMI, offer free online tools to analyze your specific loan and budget information and provide recommendations on the best repayment plans for your situation. They also offer DIY resources to guide you through the application process. Additionally, your federal student loan servicer should be your first point of contact for assistance. You can access this by logging into your My Federal Student Aid account.
Private Student Loans
Private student loans typically have fewer payment options available compared to federal loans. If you're struggling with monthly payments, consider seeking free advice from a credit counselor. They can help you overhaul your budget and find areas where you can cut back.
Credit Counseling
General credit counseling services that offer budgeting advice are often provided at no cost. However, student loan-specific counseling may incur a fee. Initial sessions can cost at least $50, providing you with a personalized repayment strategy. More intensive support as you implement the plan can cost upwards of $250. Reputable organizations, such as the National Foundation for Credit Counseling, can offer trained counselors to assist you.
Debt Management Plans
If you're overwhelmed by multiple debts, a debt management plan can help you prioritize and systematically tackle each one. For example, focusing on credit card debt first can reduce that burden within five years, making your student loan debt more manageable.
Bankruptcy
In extreme cases, bankruptcy may be an option to consider. An experienced bankruptcy lawyer can advise on whether filing for Chapter 7 or Chapter 13 bankruptcy can provide relief from student loan debt or modify its repayment terms.
Remember, legitimate student loan assistance organizations will not proactively contact you with offers of debt resolution. Always be cautious of "debt relief" companies promising immediate loan forgiveness, as it is likely too good to be true.
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Legitimate help
If you're struggling with student loan debt, there are legitimate sources of help available to you. The first step is to contact your loan servicer to understand your repayment status and options. Your loan servicer should be your first point of contact for assistance. You can find your federal student loan servicer by logging into your My Federal Student Aid account.
General credit counselling is often free. You can discuss budgeting techniques and receive guidance on how to manage your finances. However, fees for student loan-specific counselling vary by agency. You can expect to pay at least $50 for an initial session, which will provide you with a personalised repayment plan. More intensive assistance as you carry out the plan will cost at least $250. When searching for a counsellor, look for one trained by a respected organization, such as the National Foundation for Credit Counselling.
Legitimate student loan help organizations will not contact you with unsolicited offers of debt resolution. Avoid "debt relief" companies that promise immediate loan forgiveness. Instead, consider the following options for legitimate help:
- Student Loan Rehabilitation: If your federal student loans have gone into default, the government provides clear paths to recovery through student loan rehabilitation.
- Student Loan Lawyer: If you're sued by a private lender, consider searching the National Association of Consumer Advocates for a student loan lawyer. They can help you plan your defence or work on a student loan settlement.
- Bankruptcy Lawyer: An experienced bankruptcy lawyer can advise on whether filing for bankruptcy will dissolve your student loan debt or change its repayment terms.
- Public Service Loan Forgiveness (PSLF): If you work in nonprofit, military, or government sectors, you may qualify for total loan forgiveness.
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Frequently asked questions
No, general credit counselling is often free. However, fees for student loan-specific counselling vary by agency. You can expect to pay at least $50 for an initial session, and more intensive help will cost at least $250.
Yes, there are free resources available. Your loan servicer should be your first point of contact for help. You can also use the AI Assistant Aidan® at studentaid.gov for instant answers.
Legitimate student loan help organizations will not contact you via phone, text, or email with offers of debt resolution. Be wary of “debt relief” companies that promise immediate loan forgiveness.
