Index | Student Loans | Paying off Student Loan Debt

Paying off Student Loan Debt

According to statistics, two out of every three college seniors have a student loans debt of approximately $22,000. The cost of education is constantly rising, and many students and recent graduates are overwhelmed by debt. Today's economy makes it even more challenging for students to get the financial help in order to meet their educational needs.

Sometimes students are ignorant about who they should be paying and how much they actually owe. The notices from the students' lenders and the contracts they signed contain the information on what type of loan they took out, the sum of the total debt and other important facts. If you belong to the sort of students who failed to keep the papers in order, contact your school's financial aid office and ask them about your record.

Among a variety of available student loans, Stafford, Perkins, HEAL, and PLUS loans are the most popular. While PLUS loans (Parent Loans for Undergraduate Students) belong to your parents' responsibility, other types of student loans are the students' burden. Many students are using credit cards to finance their education. Unless you were lucky enough to be eligible for grants, scholarships or some financial aid, such as the Federal Pell Grant, the Federal Supplemental Educational Opportunity Grant Program (FSEOG), the Leveraging Educational Assistance Partnership (LEAP), which don't have to be paid back, you need to think how to tackle the loan problems.

You can choose a more affordable education and borrow at the lowest rates, for example, PLUS Loans for Parents or government-sponsored Stafford loans for students. In case you have federal Stafford loans, there are three repayment options available for you: the standard plan, which has fixed payments throughout the loan term, the graduated plan, which starts off with lower payments and then increases as your income is expected to increase over time, and an income-sensitive plan, which adjusts your payments according to your income and your debt load. You are free to choose the plan which is most suitable for your budget and which is likely to help you achieve your financial goals faster or more painlessly.

Many students are smart enough to try and prevent potential problems with debt while they are still in school. They don't want to wait till they graduate to face the aggravated student debt. There are certain tips for students who are still in school as well as for those who have already graduated, which can help lower their debt and learn the basics of budgeting.

The first step should be developing a plan to pay off your student loan debt. It is better to think it through before you graduate.

Saving your money is another universal advice. Get an internship or a job during summer vacations. Your campus employment office may offer a work-study program. If you manage to save even half the money you earn, the total sum will add up over the course of your college education and substantially reduce your debt once you graduate. You will be able to use the money you saved during all 4 years of studies to pay down your student loan debt. Find out about the options to save your money in a high interest savings account and earn the highest possible return on your money after a few months.

Consider doing some volunteer work in exchange for reducing student loan debt. It may be working for AmeriCorps or the Peace Corps, working as a nurse providing medical services in low-income areas, teaching, or working for a non-profit or government agency. Some of such and similar jobs forgive loans or make you eligible for grants to help you pay off your student loans.

Reducing expenses also counts as a saving money method. There are plenty of ways to reduce your expenses and budget smartly. Consider changing your spending habits if you want to eliminate stress when it comes to paying off your debts later on.

Other common tips on paying off your student loan debt include trying to sell some stuff to get some extra money for paying towards the student loan, and finding a roommate to get extra income.

Apply for scholarships. The more you apply for the more you will get, which will allow you to save thousands of dollars. If you have any gift money, work bonus, tax refund, or any spare cash, consider using it to pay down debt. It is advisable to deal with your higher-interest debt first.

Do your best to avoid making late payments on your student loans. Late payments will be reported on your credit report. If you fail to get current on your payments due to financial hardship, take action: inform the student loan company about your situation and request a loan deferment or forbearance to prevent your credit from being damaged until you can start making payments again. If you are able to make payments on time for about a year, you may be eligible for a reinstatement program, which will remove delinquent payment history from your credit report. Remember that though it is possible to suspend or reduce your monthly payments, the interest will continue to grow.

Consolidating student loans may provide you with a lower interest rate and extend the amount of time during which you have to repay your loans. At least, you will get the convenience of a single payment. However, mind that you may not be eligible for student loan forgiveness programs if you consolidate your student loans. Therefore, an extensive research is necessary before you make a decision to consolidate. Student loan consolidation can considerably lower your loan payments, but it depends on the particular situation and takes a thorough investigation and research. In case you have been paying your private student loans on-time for a few years, you have good chances to get a lower interest rate if you consolidate them.

Consider lowering payments by stretching out the loan term. You can always increase payments later or switch to a shorter term. However, remember that increasing your payments will also increase the total amount you repay over the life of the loan.

Also, if you can afford it, double payments or send at least an extra $10 per month to be able to pay down loans faster. Note that the extra payment goes toward paying down principal. In addition, there are some alternate payment plans that are worth exploring.

There are a number of student debt relief programs already available as well as planned in the nearest future, for example, an income-based repayment program, which is meant to work as the income contingent plan, but allows you pay less per month making a higher income. The loan terms on such programs require payments for up to 25 years, after which time the remaining debt will be forgiven. For those participating in these programs and working in the public sector, student loan debt can be forgiven after 10 years.

The things may be more difficult with private loans. However, there are always ways in which you can avoid the default. Remember that if your student loan is already in default, you won't be able to qualify for deferments or forbearances.

There is no doubt that education is one of your most valuable assets, and as a rule, it is very costly. It is one of the first serious tests you should pass in life. Studying and working is hard, but it gives you an opportunity to be independent, make choices, and feel worthy and proud of yourself. This is the sort of experience, the significance of which cannot be overestimated.