My son failed school and has $126,000 in student loan debt. What can we do?

How to get out of student loan debt

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Question: My son was studying in a pharmacy program and at the end of the last semester the college expelled him due to his academic failure. He owes $126,000. The interest rates are 8.5%, 5.5% and 4% (the average is around 6.5%). Now he no longer studies anything. I have the following questions: Is it possible for this student loan to be waived or cancelled? Is there a way to defer payment after May 1, 2022? Is there a way to reduce the interest rate? Since he doesn’t have a job, is there a way to cancel/cancel/cancel the debt?

To respond: We’re not going to sugarcoat the fact that your son is in a tough spot: having student loans, no college degree, and no job presents a serious challenge to paying off your debt. “Debt is unlikely to be forgiven unless you meet the criteria for one of the existing student loan forgiveness programs, such as working in the civil service for 10 years or going to a school that closed before you could complete your program,” says Anna Helhoski, student loan expert at NerdWallet. (See ways to get loan forgiveness here.) (Note that refinancing federal loans will deprive you of options such as loan forgiveness and income-based repayment plans, so you may not want to not do so; however, readers with private student loans looking for a lower interest rate may want to consider refinancing as rates are low now.)

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Income Oriented Repayment Plans

If some of the loans are federal, you can work with what is already available to distressed borrowers. “That means signing up for an income-driven repayment plan that ties payments to a portion of your income and extends your repayment period,” Helhoski says. For federal student loans, an income-based repayment plan determines your monthly payment based on a percentage of your discretionary income and lasts 20 to 25 years, with the loan balance canceled thereafter. That could result in $0 payouts, she adds.

Adjournments and abstentions

Another option is to “suspend payments by requesting an unemployment deferral or hardship forbearance,” says Helhoski. (See details on that here.) However, she points out that suspending payments or requesting unemployment forbearance are best used for short periods of time, as interest will continue to accrue and increase the total amount you owe each time you begin to repay.

How to manage private loans

For private loans, the best first step is to call the loan officer and try to get them to work with you on your payments. You might also consider refinancing at a lower rate, but “I suspect it may be difficult to refinance the loan if your son is not currently employed,” says Certified Financial Planner Lisa Weil.

And whatever you do, Matthew Jenkins, Chartered Financial Analyst and Certified Financial Planner at Noble Hill Planning, says, “Don’t co-sign any student loans for your son. This advice is intended to protect your retirement and your finances in the event that he remains unable to repay the loans, in which case you will be responsible for the payments as a co-signer.

Other things your son might want to do now

That said, there are other good options for your son at this point, say the pros. He should try to find a job to be able to repay the loans. Also, since completing the pharmacy program and earning a degree may represent the best path forward for your son financially, the second option he might consider is to contact the school to determine what resources exist to help him get readmitted and come back healthy. academic status. “He might also consider switching to another pharmacy program if it’s not possible to complete the first program,” says Jenkins. That said, if there’s a chance he’ll fail again, it might not be the best way to go.

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