As tuition fees soar, so does the average student debt. Fresh grads, young adults, and even people in their late thirties and early forties are hurting from poorly managed loans.
The Department of Education recently reported that one in every four borrowers is at least a month behind on their student loan repayment. This can be due to a number of factors, but one thing is for sure: student loans are crushing this generation in several different ways. Here are four ways you can stop student loans from ruining your life.
Pick The Repayment Plan That Suits You
Government student loans automatically register all student loan borrowers for a standard ten-year repayment option. The first payment is generally due six months after you graduate; this six-month period is also known as the grace period.
There are several repayment plans offered by the government, and the new income-based repayment plan is one of the most popular ones, due to its flexibility. Under this plan, if you work in a public service, non-profit or government job and pay every month for ten years, you are likely to have the rest of your debt and any applicable taxes cleared.
Most loan providers offer low interest rates and other incentives if you agree to have your monthly payments automatically deducted from your bank account. The government also offers various benefits if you agree to direct debit on your student loan repayment.
Direct debit will also put you in a habit of making your student loan payment before you make any other expenditure. This will help you make timely payments and also develop a habit of putting needs before wants.
Reduce Your Principal
If you get a little extra cash at any point, make sure it goes toward lowering the principal amount you borrowed. The Consumer Financial Protection Bureau has reported that it receives hundreds of complaints that loan service providers apply extra payments to their next monthly bill instead of reducing the original amount.
Make sure you pay your high-interest debts before others since it’s financially quite advantageous.
Reduce Your Rate
If you’re earning around $1200 more than your aggregate monthly debt, you may be able to get a high interest debt refinanced by a lower rate one. This will eventually reduce the interest amount you’re paying and also allow you to clear your debts faster.