Breaking Free From Student Loan Debt
The average college graduate receives their diploma with approximately $23,000 in student loan debt. However, the job market for new graduates is bleaker than ever, so finding the money to make payments on those loans can be tough — even with the six-month repayment grace period. Many branches of the military offer special enlistment incentives to troops to pay for college debt. Yet, with the cost of a college education increasing about 5% each year, those in the armed forces rely on student and military loans to finance the remainder of their education.
Whether you’re a new graduate or someone who has hit a few financial road blocks, there are ways to manage your student loans that don’t involve damaging your credit.
One of the most popular ways to save on student loan payments — or more specifically the interest you pay on them — is to consolidate multiple loans into one. Most federal student loan consolidations are done through the William D. Ford Federal Direct Loan Program, which allows you to make one monthly payment on all your federal loans. Other private lenders may also offer consolidation options, so you may want to contact your lender to find out more information.
2. Loan deferment.
A deferment is when a lender temporarily suspends your loan payments due to certain circumstances such as enrollment in school, military service, unemployment, economic hardship, or disability. The government may even pay the interest on your loan during a deferment (known as a federal interest subsidy), depending on the type of student loan you have. If you’re not eligible for a federal interest subsidy, then interest will continue to accrue during your deferment.
3. Loan forbearance.
Forbearance is a way to temporarily lower or postpone paying on your student loans if you are temporarily unable to make your payments, and you are not eligible for deferment. In most instances, granting a forbearance is usually up to your lender. If you are given forbearance, interest will continue to accrue on your loan during the forbearance period.
4. Adjust your payment plan.
There are several payment plan options for paying back the money you owe on a student loan, including graduated repayment, extended repayment, and more. Each payment plan offers a different repayment structure — for instance a 10-year repayment schedule instead of five years — so changing your plan may lower your monthly loan payment. Payment plans vary depending on the type of loan you have, so check with your lender to learn more about your options.
If you’re feeling buried under your student loan debt, don’t give up and accept default! Contact your lender, explain your situation, and discuss your options — it could mean the difference between mountains of student loan debt and an affordable monthly payment.
Do you have another solution for managing student loans? How did you successfully payoff your student loans? Tell us your thoughts and stories!