A student loan, which originally aims to help students pay for their university tuition, living expenses and other mandatory stuffs such as books and stationeries, on the other side may cause heavy burden for the aforesaid students even long after graduation. Student loan debts have gotten worse in the recent years that New York Fed economists have issued warning that such burden of student loan debt may cause stilt customer spending especially with people within the age range of 20-somethings. In a bigger picture, it may hamper the recovery of housing markets and the economy.
If you do not experience from having such debt, or if you do not have even the slightest idea on how much money these students could owe, just be sure that it is massive. Student loans can go higher than a 100 thousand dollars in which the debt causes suffering in their lives. They have to plan carefully in paying the money back in a way that does not interfere with how their life should progress. If you are one of these students who are burdened with a massive amount of student loans, here are some ways to budget your student loans and how to make it alive to the other side:
Know About Your Loans
In order to be able to set up a proper strategy to budget and repay it, you need to understand well about your loan. It starts with knowing the exact party whom you owe the loan to, and how much you owe, and further you should also know the exact terms and conditions of your loans. You need to find out which repayment plans are allowed to be applied in your loans, and whether or not your loans are eligible for an unemployment deferment or an economic hardship deferment. In addition, you also need to know about the interest rate for each loans in which it can help you in considering other things, such as a loan consolidation in order to obtain a lower interest rate. Listing down all the things you know about each and every one of your loans may help, because then you will be able to see more clearly about which loans should be prioritized first or whether you are able to save some money before putting it all to pay your student loans.
Start Early And Get Used To Pay
Student loans actually give you a certain amount of time before you need to start paying loans after your graduation. If you are still in the aforesaid stage, you may want to make use of this time to contemplate about your loans and the options which follow. Save whatever you will be paying on your loans and put it into a savings account to initiate your emergency fund, as it will provide you with the money to fall back on if you lose your job or face costly unexpected expenses. As an added bonus, you will be used to putting aside a certain amount of money which include your loan repayments so that when the time comes you will not face any difficulty in budgeting the repayment and putting some money aside.
Choose A Repayment Plan
Different repayment plans are available for different types of loans, and therefore you need to identify which loans belong to which repayment plans. For instance, an income based repayment plan is applicable for federal loans in which the monthly payments are lower compared to the regular Standard Repayment Plan. If your total debt is bigger than your annual salary, you have a higher chance to qualify for an income based repayment plan. The income based repayment plan is also tailored specifically to your income and your family size, causing it to be more manageable and flexible compared to repayment plans which is not customized. Additionally, enrolling to the income based repayment plan will help you to avoid delinquency and default, although at the end of the day you are likely to pay more compared to what you would pay on a Standard Repayment Plan since you are lengthening the time period of payment.
Consider Consolidation For Your Loan
One of the ways which can cause your student loans debt to be more manageable is by getting a consolidation for your loan. Consolidating your loan will get you a lower interest rate, and as a bonus it will also help you by making things such as bookkeeping and planning easier because your multiple loans become conjoined into one payment. As a result, you will less likely to forget your payment deadlines which may cost you late fees as well as credit issues. However, you must also remember and take note that there are certain borrower benefits which may be lost due to consolidation, such as the opportunity to claim for loan forgiveness, deferments or even an income based repayment plan. For that reason, a lot of experts actually warn you to never consolidate your private loans with your federal loans. As a conclusion, consolidation is worth to consider however make sure that you understand all terms and conditions as well as the consequences thoroughly prior to deciding.
Stick With Your Budget
After careful calculation of how much you will need to save and spend in order to pay for your student loans, you should give your best effort to stick with it. Avoid spending too much and decrease costs wherever possible. Share an apartment with a friend, take carpool to work, walk whenever possible and be ‘cheap’ with your cellular phone and electricity bills. Although it may feel like you are continuing to live like a broke college kid who you used to be, but decreasing your budget and sticking with it will actually help a lot when it comes to paying off your student debt.
Sign Up For Other Services To Get Benefits
There are services which you can sign up for to obtain certain benefits with regards to your student loans. One of the services which is beneficial for you and your student loan debt would be the auto debit. Signing up for an auto debit will actually offer small reduction of your interest rate. Although it is not significant, but it may be worth signing up for. Signing up for an auto debit service will also prevent you from paying late and getting costly late fees or negative effect to your credit report. Another service which can give you benefits would be Upromise; however, this only applies if your loan is serviced by Sallie Mae. Upromise links directly to your loans in which it will help to pay down existing debt. For each time that you shop (online or in-store, and even when dining and traveling), you can just click through their links and obtain a small percentage of cash back to be used directly toward your student loan. You can also ask help from your friends or family members to register their cards as well, because it will increase the money which is applied towards your debt.
Learn About Loan Forgiveness Options
Student loan forgiveness option is basically a method to make your student loan debt ‘forgiven’. If you have spare time to volunteer, you can join the federal program which allows you to obtain forgiveness for your student debt loan in exchange for assistance for those working in public and often non-profit service jobs. Not having the time to volunteer but actually considering to move? You may choose to move to Kansas or Detroit which offers added incentive to your loan forgiveness option if you fulfill a certain criteria when you relocate there. Furthermore, if you have always been into military trainings and army, you may consider to pursue a serious career there because it comes with many opportunities for student loan forgiveness.
Find A Job Which Pays Off
If your budget is still very tight to meet your student loan payment, consider to take overtime hours, part-time jobs or even freelancing if it is not possible for you to search for a job which gives higher salary. Many of career streams which come with the highest amount of student loan debt also comes with an opportunity to get the aforesaid loans canceled by working in certain jobs. Different with a loan forgiveness option, some employers may give the offer of student debt repayment as part of the employment incentive, and if not there are various opportunities in law enforcement, education, or non-profit organizations which offer a student loan cancellation option.
Be Aware Of Consequences
Bear in mind that ignoring your student loans can cause your credit score to be bad, it can garnish your wages and tax returns and if it is so severe it can cause you to deal with debt collection agents as well as receiving lawsuits. Once a loan is in default, you can lose a lot of your borrower benefits forever. If you are really having a hard time to pay it, apply for a deferment option or call your private lender to see if you can negotiate an alternative payment plan.