Many of us put ourselves heavily in debt for the privilege of obtaining a higher education. What many don’t realize is that this is money that eventually has to be paid back, once you’ve earned your diploma and moved on to productive work.
Actually, the answer to how to pay off your student loans is quite simple… write them a check for the amount (either in full or in installments) and send it back to the lender. It’s a simple concept, but when you consider the percentage of students who default on their school loans, it becomes painfully obvious that there’s a problem somewhere in the mix.
To get started, find out how much you owe and to whom. Most of us spend our college years blissfully unaware of the debt we are racking up. Did you get a Stafford loan? Perkins? Further? What are the terms? Get familiar with your financial scenario.
Don’t confuse grant money with loan money. Grants are free money and do not have to be repaid.
Look at the options related to loan forgiveness. Joining the military or the Peace Corps can help you pay off or reduce your loan by up to 70%. You can get more if you are willing to take on high-risk tasks. You can also get some measure of loan forgiveness by working as a teacher, therapist, or through social work.
Know your options and exercise them. After graduation, you have a six-month period in which no payment is required, the idea is that you get back on your feet and acquire a stable income that allows you to pay efficiently.
As with any loan, the longer it takes to pay it back, the more interest you’ll pay. Obviously, paying in full would be the preferred option, but if possible, choose the lowest term and corresponding payment you can handle, and then make that payment on time, every month, every month. You have several options:
Standard payments are fixed payment amounts that are made every month for a period of ten years. You get good interest rates, but fairly high payments.
Graduated Payments start low and then gradually increase over time, the idea being that the loan will keep pace with your projected salary.
You can also choose income-based or long-term payment plans designed to extend the life of the loan up to 30 years and make the monthly rate more affordable.
This may seem like a no-brainer, but… don’t leave it the default! I’ve come across more than one person who basically admitted to ignoring their school loans, with one intellectual luminary actually telling me that he “thought they’d just walk away.” No, they are there and will be treated like any other loan. If you default, it goes on your credit history and score, which could affect your ability to buy homes or cars in the future.
Added to the above….in the event of bankruptcy, student loans are the only loans that are not removed from your credit history.
If you’ve defaulted, you can still get back on track, either by using consolidation (combining several loans into one large loan with a payment you can handle), deferment (postponing your loan obligations for a set amount of time ). ), or forbearance (a three-month period during which you do not pay due to documented hardship scenarios).
As with any loan, if you have the ability to pay it off early, go for it. Paying off a loan early will save you a considerable amount of money in interest.
Don’t fall behind on your payments, as higher interest or late fees will accrue over time. Make your payment on time, every month, every month, for the life of the loan.
This isn’t limited to student loans, but a general rule of thumb is to start early and develop good financial habits, pay your bills on time, live within your means, and don’t get carried away with your credit card. Managing your debt takes some work, but establishing good behavior early on can reap considerable rewards later.
If you find yourself in a bind, unable to effectively manage the mountain of debt you’ve accumulated, enlist the help of a financial advisor who can sit down with you, objectively analyze your situation, and start you on a course designed to help you recover. your financial balance.
So take out the loans and get the education you need. But be ready when the piper demands payment from him.