6 Simple Ways to Lessen the Burden of Student Loan Debt
As you change out your book bag for a briefcase and prepare to enter into the real world, a harsh reality will hit—you must pay back your student loans. On top of this, more people than ever before earn a college degree, and so sticking out from the crowd is becoming increasingly difficult. On average, those who take out loans for their undergraduate degree are in debt by $29,400. Although the government has attempted to address the rising problem of student debt through debt forgiveness and borrowing funding models, these have not eased the problem. However, if you are graduating or have already graduated college with a considerable amount of student debt, there are some tactics you can use to lessen the burden of your student debt.
1. Pay as Much as You Can Afford
It is recommended that you realistically look at your budget and determine a payment plan that you can afford for your student loans. If you are in the phase of figuring out how much student loans to take out, keep in mind that you should not take out more than what you make in your first year out of college. Additionally, keep in mind that if you decide to repay your loans with a lower monthly rate, it will result in you paying more in interest.
2. Avoid Using Private Loans
Private student loans are different from federal loans in that they have variable interest rates. This means that the payment rates and interest paid on the loans can increase throughout its life. Although a private loan may have a lower interest rate in the beginning, it is not likely that it’ll remain that way throughout the duration of the loan. On top of this, private student loans do not have as good of repayment alternatives and zero debt forgiveness opportunities as federal loans.
3. It is Better Late Than Never for Scholarships and Grants
Entering into college you may have applied for every grant and scholarship under the sun, but there are also many opportunities to apply for scholarships while attending school. Be on the lookout for funds that are given to students that are studying in a certain field or look for extracurricular organizations that may offer their own scholarships to students. Try talking to your financial aid advisor to figure out what scholarship opportunities could be out there for you. If you can receive additional funding, it can go a long way in helping you lower your overall tuition bill.
4. Look into a Loan Forgiveness Program
You may be able to pay off your student loan debt quickly if you qualify for a forgiveness program. One of the easiest ones to qualify for is the Service Loan Forgiveness Program held by the US Department of Education. This program is in place to encourage people to work public service jobs. You can also look into joining the military, Teach for America, or the Peace Corps for loan forgiveness. If you do not want to work in public service, then there are still plenty of options such as working in low-income areas as a health professional, which can get you up to $160,000 in loan forgiveness.
5. Make Payments Twice a Month
Many people make payments twice a month on their mortgage payments to cut down the length of their payment term. However, the same concept can be used for student loans. By making your student loan payments twice a month instead of monthly you can pay a substantial amount less in interest. By paying off your loan every two weeks, you’ll be making 26 extra payments every year, which makes you much closer to getting rid of your loans altogether.
6. Use Tax Benefits to Your Advantage
As far as paying off your student loans, talking to an accountant may get you a sizable deduction. When tax season rolls around, you can deduct the interest paid off towards your student loans, and thus receive a nice return. In fact, you can deduct as much as $2,500 off of the student loan interest. Taking advantage of tax deductions lets you negate a lot of the interest that gets added onto your loan every year that it isn’t paid off, and so you can lower the time that it takes to repay your loan.