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Some options for handling overwhelming student loan debt

Americans' federal student loan debt is now at a whopping $1.4 trillion dollars. That debt is owed by about 44 million borrowers. There's no telling yet how borrowers will be impacted by the changes the Trump administration is considering to the federal student loan program,

For many people, keeping up with student loan payments as well as other debt and expenses is impossible. It's estimated that an average of 3,000-plus people default on these loans each day, and it's only getting worse. A loan is considered to be in default if a monthly payment hasn't been made for 270 days.

Even for people who choose bankruptcy as a means to get out from under their debts, in most cases, student loan debt can't be discharged in bankruptcy. So what do you do if you can't keep up with your payments?

Defaulting on the debt can have serious consequences. However, your credit problems can start long before you've reached default status. Federal student loans are considered delinquent when a payment is missed. Delinquent loans are reported to credit-scoring companies after 90 days.

A defaulted loan doesn't just go away. It only grows, because you now owe collection and other fees. It's best to look for a solution before you miss that first payment.

There are a couple of possible options for which you may be able to apply:

-- An income-based repayment plan: This increasingly-popular option lets borrowers agree to pay a designated percentage of their income monthly. That can sometimes allow any remaining student loan debt after 20 to 25 years to be forgiven. The amount of debt forgiveness is, however, considered taxable income.

-- Deferment or forbearance of the loan: This means that you reduce or stop payments temporarily. However, you'll still be accruing interest.

Even if you've defaulted on your loan, if you have the money at a later point, you may be able to "rehabilitate" it by agreeing to make at least nine out of 10 monthly payments in a timely manner. Once you've rehabilitated your loan, you can apply for one of the options noted above.

If you're having difficulty keeping up with your federal student loans, it's best get more information on your options at studentloans.gov rather than contact your loan servicer. A New Jersey attorney experienced in dealing with student loan debt can also provide important guidance.

Source: CNBC, "Three ways to avoid the financial death spiral of defaulting on your student loans," Tom Anderson, accessed July 18, 2017

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