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Student Loans

Students who require financial assistance to carry on with their college education can easily get a hold of various types of student loans. However, the loan keeps on producing interest until it is paid back which means that the amount paid in the end by the student will be a lot bigger than what was borrowed due to the increased interest on it. Now, the interest rate depends on what type of loan the student borrows. Usually most of the students go for Federal Stafford Loans or Federal Perkins Loans. Perkins loans carry the lowest interest rate; however, these loans are only given to students who can show that they are more need compared to other applicants of this loan. Stafford loans on the other hand are easier to get and can be bigger depending on your course of studies. However, they too carry a high APR interest rate.

Interest keeps on adding up to your loan amount until the day it is entirely paid back. However, there are some students who actually can get subsidized student loans. In these loans, depending on certain factors, the interest amount over the loan is paid off on behalf of the student.

Both Stafford and Perkin Loans can be easily subsidized by the student if he or she can prove to have more financial need compared to the other students who have applied for the same loan. If the student qualifies, the loan will get subsidized meaning that he or she will no longer have to pay any interest over the borrowed loan amount.

It all happens because student loans work in a way that once the student graduates, he or she will get a job after which the loan will be paid back. The interest amount is subsidized for only the time that you are in college and during the grace period as well that is 6 to 9 months for the both the types of federal student loans. Other than these times, the interest will be charged if you fail to get a job. However, if you get the deferral approved; the interest will again be waived off for that time period as well. Deferral can be approved by proving that you worked hard during the grace period to get a job but you cannot get one. If you started your job and lost it somehow, you can still get a deferral and get your student loan subsidized for the left up interest.

Basically, debt settlement means direct negotiation of your debt with your creditors; if you choose to go through this process, there are some steps you’ll need to take in order to settle your debt and ease your financial burden.

Debt Settlement

The first step is debt validation. This means giving the debt settlement company all the information they need on your debt, regarding the total amount of the loan, the amount already paid, the outstanding amount etc., basically all the information they need in the negotiation process with the respective creditor.

When considering debt settlement, you should know that not all types of debts can be settled. Secured debts are some of the debts that cannot be settled (as they are guaranteed by the property or other goods making the object of the debt), along with some unsecured ones. The debts that can be settled include student loans, store bills, credit card debts, medical bills or personal loans.

After deciding on the amount for settling the debt,you must make sure you have that amount, as most creditors want to get their money back in a single payment right after an agreement has been made. On paying the respective amount, make sure you have a copy of the payment made and a written statement that the creditor will not have any claim to raise in the future. Make sure that you have copies of all necessary documents in order to avoid difficult situations as creditors changing their mind and not recognizing the debt settlement.

Debt settlement may affect your credit score, as your creditor might not be willing to remove all negative points; you may though be able to convince them to list the debt as “settled”, and this will help improve the credit score a great deal.

If you are thinking of choosing debt consolidation instead, you should know it is a similar process, although it is not the same thing. The same rules should still apply though, and if you’re not sure which way to go it is best to seek professional aid. There are many experienced debt consolidation companies that could help you come up with a plan of consolidating your debt. It is still a long process that can take from a few months to a few years, depending on how well the company representatives manage to negotiate with your creditors.

It is important to maintain some sort of relation with the creditors, to keep them informed and let them know you’re working on a solution to pay them back, but don’t let them know your exact financial details. They should not have all control over your funds, but they should still feel that you’re trying your best to pay off your debt. And once you’ve managed to reach an agreement and paid your debts, you’ll feel the relief of a debt-free life again.