Author: Mike Stallion
Do you feel overwhelmed by your student loan debt? You’re not alone: student loans in the United States exceed more than $1.6 trillion.
It is second to the magnitude of the nation’s mortgage. In an ironic twist, the load of student debt makes it more difficult for college graduates to purchase a home.
Officials are arguing about what to do about the situation, and average Americans can’t wait to figure it out.
Creating a student debt management strategy is crucial to your long-term financial health if you don’t want to be buried in debt like most American students.
Below are some tips to help you manage your student loan.
1. Make Overpayments
To manage your debt, make more significant payments to lower the debt faster and shorten the overall payout period. Lowering the principal balance will shorten the loan time and reduce the interest paid.
For example, a $25,000 debt with 6.8 annual interest and a 10-year repayment period would cost $288 per month. Using a student loan calculator, it is clear that spending $700 per month rather than $288 may help the borrower repay the loan in a little over three years.
2. Create a College Repayment Account
Make automatic payments to separate savings account for college debt if you’re unsure how much extra you can dedicate to your student loans each month. Don’t utilize existing savings or checking accounts since you could be tempted to spend the money on anything other than your student debts.
3. Maintain a Budget
Students who do not understand how to handle their finances effectively may find it challenging to repay their debts fast. It might cause delays in achieving more gratifying financial objectives. By budgeting and analyzing your monthly financial activities, you may be able to compromise some expenses to stay afloat.
If you struggle to keep a reasonable budget as a college student, using a student budget calculator may help you get started and remain on track.
4. Submit a Loan Forgiveness Application
Forgiveness programs can help eliminate all or some of your student loan debt. However, each has diverse demands and strict approval processes.
Public Service Loan Forgiveness is the most popular program (PSLF). To qualify for this program, you must work full-time for a government or nonprofit organization in a public service role and make 120 qualifying charges under an income-driven repayment plan. It is tough to get approved for the program, so follow the instructions carefully to stay on track.
If you’re on an income-driven repayment plan, you may be able to have a part of your student loans forgiven. With these plans, any unpaid amount may be forgiven after the 20- or 25-year payback period expires. The discounted sum will not be taxed if you reach the end of your payback period before 2026.
5. Use Discounts to Reduce your Interest Rate
If you set up automatic payments on your loan, most lenders will give you a 0.25 percent to 0.5 percent discount.
Suppose you meet specific requirements, such as making a particular number of on-time payments or taking out another loan with the same firm, private lenders may provide further interest rate savings. If you have personal student loans, you can contact your lender and inquire about interest rate reductions or discounts.
By carefully considering your choices, budgeting, and actively seeking loan deals and forgiveness programs, you may find a method to manage your student loans without affecting your financial future.