By Malia Keirsey
Total credit card debt in this country is $733 billion, and economists worry about it a little. It pales in comparison to student loan debt, however, which has now reached $1.3 trillion. The millennial generation is the most indebted in our history. And many of you don’t even have credit card debt yet. Paying off this debt, an average of $35,000 per person, will take most of you into your 40s and 50s. While we can argue about how to reduce the costs of college educations in the future, the reality for you is that the debt is current and you are either beginning (if you graduated in 2016) or are in the midst of paying. You understand the personal burden you have. But there are some ways to ease this burden, and here are seven tips that might help.
- Budget for Your Payments
If you have recently graduated, then be certain that you set up a budget that includes the monthly payment expected of you. While this may sound like a “no-brainer,” many students are in default because they failed to do this in the beginning, and their credit scores have “tanked” as a result. They are now paying more for everything, from insurance to car loans as a result.
Find out if by setting automatic payments, the lending institution will lower your interest rates a bit – many of them will, even if you are several years into your re-payment.
- Pay Early and Add to the Principal Amount if You Can
Loan payments include principle and interest amounts. If you can pay more than the payment amount, you are reducing the principal of the loan faster.
If you are currently in school and incurring debt each semester, consider a part-time job to start paying off the debt while you are still a students. Any amount that you pay off now is less of a burden once you graduate and begin your adult life. Do a little research to learn some tips for making money in college that may not involve a traditional part-time job. Sometimes, these are far more lucrative.
- Look for Credit Card Deals/Offers
If you have made your payments on time, your credit score is improving continually. You will qualify for credit cards that may have zero interest for as long as 18-24 months. And most take balance transfers of student loan debt.
If you don’t receive any offers, you can look for them online. But you do need to be a wise consumer. Check out the balance transfer fee and the interest that will begin to apply after the zero-interest period is over. Usually, it will be higher than your original debt interest. Watch carefully for the end of the benefit, because you will want to do something else with the remaining balance. Many debtors transfer that balance over to the next zero-interest offer, but there is a downside to this as well. There will be another transfer fee, and with each new card you get, your credit score will take a hit.
- Watch for Assistance Programs
A number of private banks are now developing special assistance programs for people who are trying to manage large student debt. These include lowering interest rates, and re-financing the debt so that it is extended over a longer period. Because there has been so much publicity about the student loan debt crisis, and because many economists are predicting some pretty severe national economic downturns because of it, financial institutions are stepping up to the plate somewhat. Expect more of these programs to be announced in the near future.
One word of caution: If you look for assistance programs, be certain that any you look at are from reputable sources. As in any financial niches, there are some “bad actors” out there. Go through an established institution.
- Consider a Move if You are Mobile
One of the pluses of being a millennial is that many of you have not yet purchased homes and established “roots.” There are parts of the country that are trying to attract college grads to their locales and are offering student loan debt assistance to get them. Do some research and find these areas and think about moving there, if you believe you could find it attractive. The other side of this coin is that, in moving to a place for the specific purpose of getting loan assistance, you could be losing opportunities for positions/careers where your income will rise faster.
- Consider Some Positions for Student Loan Forgiveness
There are certain jobs that the federal government wants filled and has set up loan forgiveness programs for certain career choices. There are very detailed requirements and restrictions on these, so be certain to do the research before you go after any of these position with just a focus on getting reduction in your loans.
There currently are loan forgiveness programs for the following:
- Federal agencies that are having trouble finding qualified employees are allowed to offer up to $10,000 a year in loan forgiveness for employees, up to $60,000.
- If you go into family and child services, law enforcement, law (public defense), you can get forgiveness of debt.
- Some public service careers bring loan forgiveness, at local, state, and the federal level. This forgiveness relates to Federal Perkins Loans only.
- Doctors who go into the military or who work for government agencies, can receive loan forgiveness. Branches of the military also offer scholarships for medical school in exchange for a certain number of years of service after graduation.
- Nurses and teachers who work in certain environments (e.g., teachers in low-income neighborhoods)
This is just a partial list. You should research the options in detail to see if any are attractive to you.
- Watch Your Re-Payment History
Defaulting or being consistently late with student loan repayments are mistakes that can follow you for a long time into your future. Late payments tend to remain on your credit history for a full year. Defaults can remain permanently. And bankruptcy does not relieve you of your student loan debt. Your credit score becomes more and more important as you move further into adulthood. Employers, landlords, insurance companies, and future lenders all have guidelines that relate to credit scores, and you will be paying much higher interest rates on any personal loans you incur (e.g., car loans).
College is a wonderful experience. You will leave with a degree that qualifies you for a career; you will have made lifelong friends and memories that will also last forever. Most of you will also leave with an amount of debt, as a result of that experience. How you handle it has major implications for your future financial health – be wise and be responsible.
Malia Keirsey is an enthusiastic writer and guest contributor. She has finished the University of Chicago with master’s degree in Sociology. Now she’s working as freelance web designer and blogger. Her main topics of interest are writing, digital marketing and education. Follow @MaliaKeirsey on Twitter.