Paying Off Student Loans

Avoid Expensive Colleges

A college degree is a great investment, as long as you are spending a reasonable amount of money to attain it. Paying off student loans becomes difficult when you are $200,000 in debt as soon as you walk across the graduation stage. This is why you should never attend expensive colleges unless you are on a full scholarship. There have been countless horror stories of recent college graduates who attended expensive private institutions and are sitting on mountains of debt with no job. Your college debt would be much more manageable if you have a hard time finding employment and you are in a small amount of debt from a state college rather than a private school. A college degree is what you make of it and it should not cost $150,000 for you to learn something. If you follow this advice, you will find it easier when paying off student loans.

Paying Off Student Loans

Understand the Types of Loans That You Have

Most students are paying for college using Federal Stafford Loans, Federal Perkins Loans, and Federal Plus Loans. Federal Stafford Loans are the most common and come in the subsidized and unsubsidized forms. The interest on subsidized loans is paid by the government while you are in school while the interest for unsubsidized loans adds to the cost of your education while you are still in college. Repayment of Federal Stafford Loans begins six months after you graduate, drop out, or drop below half time status. It is much better to have subsidized loans because you will end up paying a lot less. The Perkins Loan is for lower income students and has the lowest rate for any federal loan which is currently at 5%. Students are given a 9 month grace period after they leave college before they have to begin loan repayment. This is the best type of student loan to have. Federal PLUS loans are not subsidized by the government, have higher interest rates, and repayment begins when a student is still in school. The Federal PLUS should be avoided if possible. Read more about tips for college.

Live Below Your Means

Paying off student loans would is easier if students lived below their means when they graduated from college. It is easy to feel as though you are entitled to a nice new car because you worked hard to graduate from college but you must first pay off your debt. The longer you let your debt sit the more interest accrues and the more expensive it will be for you to pay it off.

Choose the Repayment Option that is Right for You

Make sure that you are aware of all of your available options when paying off student loans. For the Federal Stafford loan repayment can be done in even increments over 10 years, increasing payments over 10 years, even or increasing payments for 25 years for amounts over $30,000, and income sensitive payments. Even increments means having the same payment amount every month. It is recommended to pay in even increments over the shortest period of time in order to lower the amount of money that is paid in interest and so that you do not have payment increases that are too high for your salary. Perkins loans can be repaid over a maximum period of 10 years and the minimum amount per month is $40 per month. Perkins loans can also be forgiven for acts of public service. Federal PLUS Loans are repaid using the same payment options as Federal Stafford Loans. It is best to pay off student loans in even payments so you know what to expect every month and in the shortest period possible to reduce the total amount of money that is paid back due to interest.

Do Not Borrow More Than You Need

I remember countless times where I have seen students receive thousands of dollars in refund checks that turned out to be loans. Even though they were able to buy rims for their cars and iPads, eventually the money had to be paid back. Do not get yourself into unnecessary debt because you want nice things in college. It is not worth it because you will have to pay back the principle and interest from those loans so that iPad that you bought will end up costing you a lot more than if you just saved up and bought it with your hard earned money. Do not borrow more than you need. This is one of the most important aspects of paying off student loans.

Make Sure Your Degree is Worth Something

If you want to be able to pay off your student loans then you will need a job. As simple as this sounds, many students continue to pay tens of thousands of dollars for degrees that will not land them a job once they graduate. Focus on fields of study such as mathematics, accounting, and engineering that are in high demand in the job market. If you find your coursework too easy or if you find yourself asking how any of your classes relate to the real world then that may be a good indicator that you are not in a major that will be in demand. If you are in a major that is not in demand, switch your major or pick up a minor in a lucrative field. Make sure that you choose a field of study that will allow you to pay off your student debt.

Investigate Deferment and Forbearance Options

If you are having trouble paying off student loans then you should look into deferment and forbearance options. Deferment is the delaying the payment of a loan. You do not have to pay the loan and the interest does not accrue while your loan is postponed. Forbearance is similar to deferment but the interest accrues while your loan is postponed. Deferment is the better option because the interest does not build up while you delay your payments. Forbearance is usually granted upon request with proof of a valid reason. Deferment is usually granted to if you are enrolled in classes at least part time. Speak to a student loan officer if you are interested in deferment or forbearance.