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5 student loan facts you should know

This article is sponsored by Democracy FCU

Everyone knows college is expensive. It’s become a national problem significant enough that it was a major talking point during the 2016 presidential campaign.

The average annual cost of attending a four-year college in 2015 was $25,409, according to the National Center for Education Statistics. The expense is high enough that many students and families would not be able to afford it without the option of taking out student loans.

While student loans can be a great deal, they are not all equal. For students and parents who are using loans to pay for tuition and other expenses, it is important to find a trustworthy, reputable lender and to understand the repayment obligations of the loan.

Here are some student loan facts you might not know.

It’s a lot of debt

In June 2010, student loan debt surpassed U.S. credit card debt, according to an article by Deanna Templeton for Yahoo Finance. “Since then, outstanding student loan debt has surpassed the $1 trillion mark — making it the single-largest form of household consumer debt outside of home loans,” she wrote.

Bankruptcy is not an option

Current law prohibits both federal and private student loans from being discharged in bankruptcy. The only way to get bankruptcy relief from student loans is if the borrower is able to prove undue hardship; however, requirements for qualifying are extremely strict. In fact, meeting the requirements for undue hardship is nearly impossible, so borrowers need to realize student loan debt must be repaid.

Some teachers can earn student loan relief

Elementary- and secondary-school teachers can qualify for a break on their student debt if they teach five consecutive academic years in areas that serve low-income families and meet other qualifications, according to the U.S. Department of Education.

“You may be eligible for forgiveness of up to a combined total of $17,500 on your direct subsidized and unsubsidized loans and your subsidized and unsubsidized federal Stafford loans,” the department stated.

If you have a loan from the Federal Perkins Loan Program, you might be eligible to have your loan canceled for teaching full time at a low-income school or for teaching in certain subject areas.

Required counseling might not be effective

All students who take out federal student loans are required to complete counseling sessions before borrowing any money and again when they finish their degrees. Most colleges use online modules provided by the Department of Education. Unfortunately, the modules are bulky and ineffective, explained Ron Lieber in an article for The New York Times.

“The modules are filled with phrases like this one: ‘Graduation before exceeding your maximum eligibility period protects direct subsidized loans received from interest subsidy loss,’” Lieber wrote.

“The financial aid system is more complicated than it ought to be, and even adults have trouble making sense of it. How on earth can we expect a bunch of teenagers to sort it out?” Lieber asked.

Change your payment plan

Standard student loan repayment plans are based on a 10-year term. For some graduates who aren’t making much money or who have been unable to find work in their field, the payments might be more than they can afford.

In those instances, the education department’s advice is to apply for an income-driven repayment plan. “Your monthly payments will likely be lower than they would on the standard plan — in fact, they could be as low as $0 per month — but you’ll likely be paying more and for a longer period of time.”

You’ll be required to provide documentation of your income to your loan servicer each year and your loan amount will be recalculated based on your income.

So far, Congress has chosen not to take action on the high cost of college education and on the problems associated with student debt. That means the current situation is unlikely to change soon and students and parents must continue to find ways to pay the cost of college — in many cases with the help of student loans. Working with a lender you trust is one way to make certain your student loan experience is a good one.