Four ways to manage your student loans debt

Student loans accounted for over a trillion dollars of Americans personal debt in 2014. That number is likely to grow even higher larger 2015 as record numbers of students register for higher education. Paying for college doesn’t have to send your finances into a downward spiral. Here are some suggestions on how to avoid student loan pitfalls.

Manage Student Loan Debt

  1. Realistic about your Budget

If you have not saved for college, then you need to be realistic as you begin applying to schools. Loans can cover the gap between any savings and tuition cost, but if you plan to enter a career with a historically lower income take that into account in your planning. Larger loans will not be affording on smaller incomes and will create distress upon graduation while seeking employment. The rule of thumb when borrowing for college is not to extend yourself beyond that total of your first two years of expected salary. For affordable options, seek out state institutions or apply early admission to smaller liberal arts colleges early when they have the majority of their merit aid available.

  1. Choose the most favorable Federal Loan Repayment Plan

Not only do federal student loans offer some of the most favorable rates, their payment plans are very forgiving. Students will find that federal loans accommodate a variety of income levels and payment schedules. Graduates that fall upon hard times will find that federal loans programs make great efforts to accommodate hardship graduates with deferment, pay as you earn and forbearance programs.

  1. Pay Interest Early

Most college loans upon graduation go into an automatic deferment for up to six months. During this period, unsubsidized loans are accruing interest. Making payments toward your principal during college will prevent larger amounts of interest from rolling into your loan total. Payments need not be large or frequent, but making annual ones can decrease your balance owed by thousands.

  1. Inquire into Loan Forgiveness Programs

Certain loans offer forgiveness clauses that absolve the balance of graduates who take jobs in underprivileged areas or nonprofit organizations. There are also individual state programs that loan money to teachers or nurses with stipulations that require working in certain areas of that state for a set number of years.

Ideally you would have planned ahead and used a college savings account to fund your higher education endeavors. If you discover you need to apply for financial assistance for college, you should begin by filling out the Free Application for Federal Student Aid (FAFSA). This is a great place to begin because the form will provide useful information regarding how much aid you can borrow from federally subsidized and unsubsidized programs. Students should be smart in their choices to borrow money for college and never borrow more than they need to finance their education.

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