How to Reduce the Burden of Student Loans : Guest Blogger Chris Jacobsen
If you thought the path into college was rough, you’ve probably not heard the horror stories about student loans from those who’ve graduated. They’re stuck in the unenviable position of having the degree they’ve always wanted, yet burdened by a load of debt that they must repay for the better part of their lives. Student debt is becoming worse by the day as college costs soar and students are left with no way out but to borrow at exorbitant rates in order to afford an education. Not everyone can go to college on their parents’ savings or by the strength of their wealth, so they do have to borrow to meet their tuition fees and other expenses. However, with just a little careful planning, students can reduce this burden considerably:
- Go in for a federal loan instead of a private loan – there are many repayment options and deferment plans if you’re beset by money problems and unable to make your monthly payments. Choose from the Parent Plus, Grad Plus, unsubsidized Stafford, subsidized Stafford, and the Perkins loans.
- Apply for a loan well in advance because the competition is fierce and you don’t want to lose out because you’ve been tardy in sending in your application.
- Enroll in a degree that will allow you to find work in the public sector – you can take advantage of loan forgiveness programs that allow you to write off your student loan if you work in the public sector or in nonprofit organizations for a period of ten years. There are conditions to these programs – you will be asked to work in rural areas or low-income environments, so if you’re ok with this, choose to become a nurse, a teacher, a cop, a civil servant, or any other public service professional.
- Minimize your expenses in college and start putting aside money every month to pay back your student loan. You could take on a part-time job, save some of your allowance, and generally live frugally in order to reduce the burden of your debt when you graduate.
- Once you graduate, find out how much you owe every month, and how many years you have to repay your debt. Based on your monthly income, you can decide if you want to decrease your monthly payment and increase the number of years you have to repay your loan. This helps you avoid delinquency (missed payments) or worse, a default (avoidance of payment altogether).
- Take advantage of the College Cost Reduction and Access Act (CCRAA) which allows borrowers of qualified federal loans to pay back their debt on a sliding scale based on their income using Income Based Repayment (IBR). If you earn less than your monthly due, this rule allows you to reduce your monthly due to 10 percent of your income. This makes you a debtor for a longer period of time, but at least you avoid the consequences of delinquency (poor credit history, difficulty in securing any kind of loan) and default (wage garnishment, withholding of income tax refunds and Social Security benefits, turning over of debts to collection agencies).
- There are also other options when you cannot meet your monthly payments – one of them is loan deferment which allows you to defer payment on your loan for a certain time period. You could take advantage of this option if you’re going back to school or if you lose your job and are unable to make payments on your loan. When you go in for a deferment, there are some loans that waive even the interest due; but for others (mostly unsubsidized loans), you may have to pay at least the interest due every month in order to prevent it from accumulating and adding to your overall debt.
- Another option to consider is loan forbearance where the lender allows you to temporarily suspend payment because of financial hardship or similar reasons.
Before you take advantage of all these repayment options, remember that putting off the repayment of a loan or paying less every month means that you remain a debtor for a longer period of time. So plan your future even before you join college – it helps you avoid debt and lead a peaceful life.
This guest post is contributed by Chris Jacobson who writes on the topic of Criminal Justice Degree Online . Chris can be reached at his email id: chris.jacobson7-AT-gmail-Dot-com