The average college student graduates with two things: a degree and about $30,100.
The degree is theirs, but, sadly, the money isn’t.
Students go to college to pursue higher education and, in the process, attract a debt burden that can take several years to shake off.
In truth, student loans are a double-edged sword.
They come to the rescue of the many families who cannot afford to send their kids to college, but then must be repaid with the accrued interest.
Even though repayment periods are long (up to 25 years or more), student loans can mess up your future plans. They can delay your goal of buying a home, getting married or starting your own business.
However, it’s not all gloomy.
There are effective ways to ease your debt burden, and we are sharing them in this post.
Know You’re in It Alone (Largely)
A student loan becomes your responsibility the moment you fill out and sign those application forms.
Don’t expect anyone to bail you out. This is important. Having the right mindset about your student loan helps you stay focused on clearing the bill.
Even though the federal administration is pushing for reforms to help indebted students clear off their loans with ease, it’s not smart of you to count on it.
Politicians and elected representatives make all kinds of promises. Most are easier said than done.
What about employers? Can they help employees with student loans pay up what they owe?
A 2015 survey revealed only 3 percent of employers had some kind of student loan assistance program!
Higher education can unlock your career goals, so embracing the fact that you have to pay off your student loans can go a long way in easing the burden, albeit mentally.
Understand Your Loans
There are different kinds of credit products in the student loan market.
As such, you must have a pretty good handle on the kind of loans you are signing up for.
For instance, is your loan federal or private? Subsidized or unsubsidized? Fixed interest or variable interest?
Federal loans are offered by the federal government, and they can either be subsidized or unsubsidized.
If your loan is subsidized, it means the government will pay the interest during certain periods. If it’s unsubsidized, you’re responsible for paying the interest entirely.
Private loans are offered by private credit providers.
If either your private or federal loan is fixed interest, it means the interest will remain constant throughout its life.
On the other hand, variable interest loans have varying rates, and they are typically available for people looking to refinance or consolidate their student loans.
Avoid Making Loan Mistakes in College
Let’s admit it.
In college, student loans don’t seem real. It’s so easy to get lost in books and fun and forget that the amount you’re racking up will need to be repaid sooner than later.
Yet, college offers a good opportunity for borrowers to begin easing their debt burden.
Performing simple tasks such as keeping track of your loans can help you stay on top of your finances and ensure you’re only borrowing what you need.
Pursue opportunities for grants and scholarships to supplement your college fund and keep loans low.
Also, try to pay off some interest while in college.
You are probably wondering, “going through college on a super-tight budget is already hard enough, how can I afford to pay off some interest?”
It’s all about financial prudence.
If you can reduce your trips to burger joints and go easy on the cocktails, you will have enough money to take care of a good chunk of your loan interest.
Find a Repayment Option that Eases Your Debt Burden
When it’s time to start repaying your loans, explore various repayment options to find one that best suits your situation.
If you are a federal borrower, you will likely settle for the standard plan, which allows you to pay equal installments of $50 for up to 10 years. It is the fastest method to clear the loan, and you will end up paying the least interest.
But things don’t always work out the way they should.
You land a job and realize your income can’t sustain your monthly payments. What next?
Here are your options:
- Income-Driven Repayment Plans
- Graduated Repayment Plan
- Extended Repayment Plan
Income-Driven Repayment Plans
The government offers four income-driven repayment plans: pay as you earn (PAYE), revised pay as you earn (REPAYE), income-based repayment (IBR) and income-contingent repayment (ICR).
You must dive into the finer details of each plan, pick out the pros and con of each, and settle on one that fits your income situation.
Generally, income-driven plans extend the life of your loan by 10 to 15 years, so you may end paying a lot more in interest.
Graduated Repayment Plan
Offers you the flexibility to start off by making low repayments, after which the installments will increase every two years.
The loan must be repaid within 10 years.
Extended Repayment Plan
This option gives you up to 25 years to settle the loan, and you can go with fixed or graduated installments.
It’s open to holders of federal direct or federal family education loans (FFEL) secured after October 7, 1998.
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Seek Loan Forgiveness
Don’t you wish someone could just forgive or cancel your student loans?
Oh! Sweet wishes.
Although it’s highly unlikely that anyone could cancel your loan outright, there are steps you can take to secure federal student loan forgiveness.
Public Service Loan Forgiveness
Holders of federal direct loans in professions such as teaching, firefighting, and nursing can be forgiven if they work for a governmental or non-profit organization for 10 years straight.
Perkins Loan Cancellation
Perkins loan, which is available for students with exceptional needs, can be canceled after the holder has served some years in a qualifying public organization.
Only members of certain professions qualify for loan cancellation.
Some income-driven repayment options also carry forgiveness benefits, generally after the borrower has done 25 years of repayments.
Student loans are a necessary evil.
While they can help you to pursue your educational goals, the debt burden can wear you down and even affect your mental health.
But armed with the information fleshed out in this article, you can take steps to ease the burden and live a fulfilling life.
If you need help applying for loan forgiveness or finding a repayment solution that meets your financial needs, don’t hesitate to seek expert help.
What’s your student loan experience? We’d love to read your thoughts in the comments section.