Today’s post is a great guest post on tips to overcome student loans. The first major debt we overcame in the DD household was student loans and I definetly recommend checking out the tips below to help out. You’ll notice my approach to #3 is different, but overall there is clarity to be gained if you’re unsure about student loans.
Own Your Student Loan Repayment – 4 Tips to Overcome Student Debt
By Drew Cloud, founder of The Student Loan Report
There is a generation of Americans delaying homeownership, marriage, starting a family, and buying new cars because they are dealing with a large amount of student debt. According to the Federal Reserve, the amount of student loan debt in the United States exceeds $1 trillion, which has made it a major issue.
As for why some students are facing high amounts of student debt, much of it stems from things like switching majors, stopping and restarting school, or switching to colleges that don’t accept some credits and having to go to school longer. Plus, many students don’t realize that the loans are accumulating the way they are. Not having to repay immediately gives the illusion that the loans are “free money.” This can result in student loans being used as a way to live rather than just a way to pay for school.
Some students have six-figure student loan debt because of being in college much longer than anticipated or pursuing graduate degrees. The American Student Dental Association says that a dental school graduate has nearly $250,000 in student debt. According to the American Bar Association, a law school graduate’s debt is approximately $125,000.
Tips to Conquer Student Debt
Once school is over, it’s time to conquer the student loan debt if you haven’t started already. Some students start repaying their loans while they are in school so they can be paid off sooner after graduation. The first thing you have to do is understand your loans. Look at the size of the debt, know whom you owe, know your interest rate, and read the terms. You should see which loans are eligible for income-based repayment and which ones aren’t. You also need to look into hardship deferment, which isn’t recommended unless you absolutely need it and can’t get into an income-based repayment plan. Hardship or unemployment deferment can delay the repayment of the loan, which isn’t technically overcoming the debt. Instead, it is putting it off. Nonetheless, the option is there.
Here are four additional tips to help you overcome student debt:
- Research during the grace period – The grace period is the amount of time after graduation before you need to start paying back your student debt. Take this time to research all loan repayment and payment reduction options so you can try to reduce your debt. This means refinancing to reduce interest and seeing which repayment programs you qualify for. The Department of Education has repayment plans for Direct Loans and FFEL loans. For income-driven plans, it is possible to have the remainder of the loan forgiven after a certain number of qualifying payments have been made. Learn about your options and use those you qualify for so that you can pay off your student debt faster.
- Consider Consolidation – When you have multiple federal loans, you can consolidate them into one Direct Consolidation Loan. This simplifies the repayment of the loans so you don’t have to make multiple payments. Despite the convenience, federal consolidation doesn’t save money; on the contrary, private student loan consolidation offers the chance for a lower interest rate. With this as an additional option, consolidation opens up more doors towards savings.
- Pay more than the minimum payment – You will almost always hear that the best way to defeat student debt is to pay more than the minimum payment. This will pay the loan balance down faster and will save money on interest in the long term. To ensure you make your overpayment consistently, you can sign up for auto-debit so the lender takes the payment from your bank account every month. This prevents you from forgetting to make the payment and keeps you from reducing how much you pay at the last minute. It can be tempting to pay just the minimum if you want more money in your pocket. Auto-debit will prevent you from doing that, which will make you happier later.
- Explore loan forgiveness programs – There are many loan forgiveness programs out there. For instance, you can volunteer with a nonprofit in exchange for having at least a portion of your loans forgiven. Some states will even forgive a percentage of student loans when people move there to work in certain fields. It’s also possible for loan forgiveness to be job-specific. Look at opportunities in your state and your field of work to determine which programs you may qualify for.
Keep at It
Once you have put your game plan in motion, you have to stick to it. This means making a budget and not deviating from it. Downgrade things that aren’t necessary, such as your cable package. Look at the big picture and see how you can free up money so that you can increase the monthly payment on your loan. This is important because the sooner you pay off the loan, the better off you are going to be. You won’t have to put off life’s major milestones any longer. The elimination of the payment will mean you will have more money to pay on that car you always wanted or to put a down payment on your first home. There are many possibilities awaiting you. Paying off your student loan is the first step toward experiencing the joy that results from the hard work you put into your studies.