Paying Off Your Student Loans
You may have graduated with honors from your college of choice and obtained a great-paying job but you’re not out of the woods yet. The specter of student loans can follow you for many years after graduation, costing you hundreds each month depending on the amount you borrowed. Nearly 75 percent of graduates owe at least $25,000 in student loan debt, according to US News and World Report. Even if you did get a great-paying job out of college, you may still struggle with this debt. If you’re still looking for a job to match your newly framed diploma, you will have an even harder time paying down your debt. Here we take a look at ways to pay off your student loans.
Budgeting
It’s best to start paying down your debt as soon as possible upon graduation and as fast as possible. You can do this by adding a little bit more each month to your stated loan amount, just like you would do a credit card to cover the interest rate. This is especially important to do if you’re planning on buying a house in the near future. If you’re feeling overwhelmed with all the student loans you have to juggle—many of you have several—make a budget each month using a spreadsheet or software to keep track of when each one is due and how much it is. Better yet, check out the federal government’s National Student Loan Data System, which allows you to create an account and manage all your loans in one convenient online location.
Debt Consolidation and Management Programs
Having a bit of trouble meeting your monthly payments? You may consider debt consolidation. When you consolidate all your debts, you’re essentially signing up for a brand new loan to pay off those debts, allowing you to obtain a lower interest rate in many cases and thus pay it off more quickly. However, obtaining lower payments doesn’t necessarily mean you’re saving any more cash. You could even be paying more in the long run because you’re stretching payments over several more months and racking up more interest. That being said, if you’re diligent and serious about reducing your student loan debt, pay off the loan quickly, within three years on average, and you won’t fall victim to those sky-high interest rates that will only sap more money from you over the years. You can also turn to debt management programs, which essentially allows a company to accept one total payment for you and distribute it among your creditors.
Loan Deferment
Put off paying on your student loan through loan deferment. Apply for this option fairly quickly, as you don’t want to default on your loan first. Who qualifies? People in the military, those who are unemployed and individuals facing an economic hardship of some kind can all qualify for loan deferment, which allows you to stop paying your monthly loan obligations until a future date. Be aware that the interest you owe doesn’t necessarily go away. It actually keeps accruing on unsubsidized student loans. If you can swing it, pay the interest each month at the very least.
Tax Breaks
There are three helpful educational tax breaks, according to the Huffington Post: tuition and fees deduction for $4,000, learning tax credit of $2,000 and the American Opportunity Tax Credit for $2,500. Navigate the U.S. Department of Education website for additional help in finding the right tax break for you.
