Photo courtesy of Daniel Teolijr via Wikimedia Commons.
Groaning over loans? We don’t blame you. Here’s what many students are dealing with post-school, and the best way to keep debt under control.
Update 11/8/2013: A useful infographic: Getting A Degree Without Breaking The Bank (click to expand image)
According to American Student Assistance, there’s roughly somewhere between $902 billion and $1 trillion in total outstanding student loan debt in the United States today.
About 60% of America’s 20 million college students borrow annually to pay for tuition, with the average loan balance for all age groups at $24,301.
If that seems like a lot of money, that’s because it is – more than the entire country’s credit card debt. The Center For American Progress reports that in the past two decades, the cost of higher education has increased by more than 1,000%. It’s no wonder loans can become lifelong issues not just for students, but their entire families.
Here are some tips on keeping loan debt under control, as pointed out by The Project on Student Debt:
1. Know your loans, and their grace periods. It is important to keep track of your lenders, balance, and repayment status of pending loans, which you can check by visiting www.nslds.ed.gov (National Student Loan Data System).
Staying organized will help you plan out repayment, and budget yourself accordingly. Different loans have different grace periods, so know how much time post-school you have before you’re required to pay up.
2. Pick the right repayment options. Federal loan payments will automatically be based on a standard 10-year repayment plan. If the standard payment is going to be too difficult, you can change plans down the line if you want or need to.
Extending your repayment period beyond 10 years can lower your monthly payments, but you’ll end up paying more interest. Visit IBRinfo.org to find out about income-based repayment (IBR), and if it works for you.
3. Know the options if you’re struggling, and if you qualify for loan forgiveness. If you are unemployed, have health problems, or are facing other financial challenges, there are options for loan deferment and forbearance that may be suitable for you. There are also loan forgiveness programs for people working in certain work fields or for certain employers.
4. Lower your principal if you can. If you can afford to pay more than your required monthly payment, you can lower your principal, which reduces the amount of interest you have to pay over the life of the loan. You can do this by sending a written letter to your lender, letting them know to apply the extra amounts to your principal.
5. Consider consolidation. Struggling to keep up with various different loan payments? You can combine multiple loans into one for a single monthly payment with a fixed interest rate, if it suits you. Avoid consolidating federal and private loans, because you’ll lose the borrower’s benefits that come with federal.
Ignoring your student loans has serious consequences that could last a lifetime, and lead to delinquency and default.
Default kicks in after nine months of non-payment, after which your total balance becomes due and increases dramatically, your credit score is ruined, and the government can seize your tax refunds. For private loans, default can happen even quicker, and put anyone who co-signed for your loan at risk as well.
Hopefully, it won’t come to this for you – talk to your lender about any issues you may have. With help, patience, and organization, you can avoid serious trouble.
Burdened by student loans? We feel your pain. Tweet us @curiousmatic; we’d love to hear your thoughts!