Student loans are a necessary evil in today’s economy. It is almost impossible to get a decent job without a college education, and even with a degree, the odds are stacked against you. As a result, many college graduates find themselves in temporary positions or still in the midst of their job search by the time their student loans are due for repayment. Luckily, new federal and private initiatives have been implemented that can help you repay your student debt without falling into financial ruin, and these tips will help you learn how to take advantage of all your options.
Educate yourself about student loan repayment
Don’t let the bills pile up. Find out what kind of loans you have, and figure out what your grace period is. A grace period is the time that you can wait from when you leave school to when you must make your first payment. Different loans have different grace periods, but the most common time frame is six months. Oftentimes, it makes financial sense to consolidate your student loans into one so it is more manageable. Check with your leader to make sure your grace period has not changed once you consolidate. Most student loans also have forbearance options. These are periods of time that you may go without paying if you have life events that prevent you from doing so; a job loss, the birth of a child, or caring for a sick loved one. The most important thing is to communicate with your lender if you are unable to repay at some point. Most of the time, they will be more than willing to work with you to resolve the issue. The worst thing that you can do is let the bills pile up.
Learn about your options for repayment. Federal student loans have recently created a program known as “Income-Based Repayment” which caps your monthly payment at a manageable percentage of your annual income. The payments go up periodically over the lifetime of the loan, and most programs last 25 years. The downside of this program is that although your monthly payments will be relatively low, you will wind up paying much more in interest over the lifetime of the loan.
Lower that principal. The best way to take advantage of an Income-Based Repayment program is to lower the principal as often as you can. You get to take advantage of the benefits of low monthly student loan payments and get your loan balance knocked out at the same time. The way to do this is to pay your monthly bill as normal, but also pay any extra income that you receive directly to your student loan’s principal balance. Notify your lender in writing that the amount above your regular payment is to be applied directly to the principal, and not to be applied to future loan payments. After you have paid the extra amount, check to make sure that it was applied to the principal as you requested. This is a great way to avoid paying double the amount you originally borrowed by the time the loan is paid off.
Figure out how to trim down your student debt
Check out loan forgiveness. There are many different entities that offer student loan forgiveness programs. No matter what field you are in, it is worth your while to check for any options you may have available to you once you have entered repayment. A new federal initiative called “Public Service Loan Forgiveness” wipes away any student debt that remains after you have made 10 years’ worth of qualifying payments while working in government, nonprofit, or other jobs in public service fields. Those in the Armed Forces also have many options and should check with the appropriate military officials for advice. Private institutions are also following suit, so check with your employer to see if any programs are available where you work as well.
Find an income stream. So far, you have learned how to make your monthly student loan payments smaller as well as ways to pay down you principal quickly. The next step is to find a reliable income stream to depend on for your payments each month. Look for freelance work aside from your regular job, such as writing for reputable online pay-for-writing sites. You could also get paid for doing something you are good at, such as doing taxes for friends or caring for children once a week in your home. You just need to make enough extra income every month to cover your student loan bill so that you can spend your paycheck on other necessities, bills, and building your savings.
There are ways to manage your student loans. The debt is not what you see on your statement if you learn about the various options for repayment. If you follow a few simple tips, getting the jump on your student loan debt is a very realistic goal.