If you have been to college and are a proud graduate, or college is part of your future plan, then you know how expensive it is. Chances are that if you have furthered your education, or are planning to, student loans have found themselves in the equation out of necessity. If you are not careful, these loans, which may seem like a blessing to you when you need them, can prove to be a menacing dark cloud that hangs over you for many years post graduation. The only way to free yourself from the weight of this massive source of debt is to pay them back and do so in a timely manner as to avoid any negative reflection on your credit report. Here are a few tips to help you tackle this financial nightmare that has the potential to hold you back.
Find the Best Payment Option for You
You have the option, before accepting any loan offer, to speak with loan officers or advisors at your school and discuss the options that are available to you for your loans. There may be extended payment options that cost you a little extra on the overall payback amount of the loan, but lower your monthly payments. If you have been granted multiple loans, you may benefit from consolidating them and combining the payments so you only have to manage 1 account monthly. Educate yourself with all the possibilities out there for you and consider your estimated post graduation income so you can develop and educated realistic plan of attack that you will actually be able to comfortably maintain.
Pay as Much as You Can
If you find yourself in the most desirable of situations, where you have a little extra income, you should always try and pay more than the minimum balance due on your loans if you can. The reasoning behind this is simple, the more you pay, the faster it goes away. If you begin paying more of your loan than you owe, you also buy yourself “freebie” months where nothing is due, this can be particularly helpful if an unforeseen emergency expense pops up, at least you won’t have to worry about falling behind on your payments. You will also save money on interest by paying your loan off quickly.
Always make the minimum payment on your loan. If for some reason you find yourself in a situation where you are unable to make payments for an extended period of time, contact your loan providers and discuss options for suspending payments for a determined amount of time. There are options such as deferment or forbearance due to disability or financial hardship that allow for you to go for a predetermined amount of time, sometimes 6 months or a year, without any payments due. Some of the options will continue to incur interest; some options will completely suspend the loan payments. Both these options are great if you find yourself in a tight spot because they keep you current. If you simply stop paying because you cannot afford to pay, your interest and payments will continue to accumulate and you will be reported negatively to the credit bureaus.
Loan Forgiveness Programs
Most states offer loan forgiveness programs, or programs that will forgive part of or in some cases the total amount of a loan in trade for service of some kind. One of the most well known programs is the military. As payment for time served, the military offers to repay a portion of your loans. There are additional programs in a variety of careers that vary from city to city. If you get online and research the programs available in your field in your specific area, you may find that this is a great way to do some good for your community while also helping yourself get rid of some debt in the process. This option is a win/win if you ask me.
If you have multiple loans and are unable to manage monthly payments for all of them, if consolidation and a loan forgiveness plan have been ruled out as options, a final option to consider is loan serialization. Basically, this option requires your loans to be bought by a lender who then “stacks” the payments, allowing you to repay one loan at a time. This is not always the best option because it greatly increases the amount of time that you are paying on the loans, increasing accumulated interest. This option is helpful in some cases however because it helps by considerably reducing the total monthly payments due.
George Gallagher works with students and helps them find solutions for their private student loans and consolidation situations. He is also a writer who has written on over one hundred finance blogs.