Practical Plans for Paying Off Student Loan Debt
Higher education is one of the best investments you can make in your future - but it does come with a hefty price tag. Take a sensible approach to repaying your student loan debt with the advice below.
You left college with a degree, some good memories, a bright future...and a whole lot of debt. Relax, you're not alone. Although the debt can seem insurmountable, you can make your payoff plan more manageable.
Stay Organized
Now that you're officially an adult, you need to organize your financial documents like one. Don't simply shove everything into an envelope, shoe box or backpack. Staying on top of your loan payments is a serious matter, and you should treat it as such. Get a separate file for each loan, and keep all documentation, coupon books, etc., in its appropriate folder.
Remember Your Grace
You probably signed those loan papers a long time ago. Do you remember what the actual terms were? If not, go read the fine print. You'll probably find that you have a grace period. That means you get a break (probably six to nine months after graduation) before you need to start making payments. This should give you time to get somewhat settled and take a look at your payment options before you actually have to start making them.
Explore Your Options
Back in the olden days (ha) there was only one student loan repayment option: fixed, equal payments spread over a 10-year term. I'm sure this is still an option, but it's not the only one. Because so many students today need student loans to finance their education, there are many flexible repayment plans available. Check with your lender to see what type of arrangement you can work out. You may be surprised at how willing they are to work with you.
Don't Ignore
There may be times it's financially difficult or impossible to repay your student loan. But don't just stop paying completely. The best thing that you can do is contact your lender and apply for a deferment, forbearance, or cancellation of your loan. Here's what those terms mean:
- Deferment: Your lender gives you a temporary break from student loan repayments based on a specific condition, such as unemployment, temporary disability, or a return to graduate school on a full-time basis. If it's a federal loan, the federal government pays the interest that accrues during the deferment period, so your loan balance won't increase. Deferments usually last six months, but don't think you can beg a deferment once a year - there's a limit to how many you can take over the life of the loan.
- Forbearance: The lender grants you permission to reduce or stop your loan payments for a certain period of time, but interest continues to accrue, even on a federal loan. A forbearance is solely at the lender's discretion. A forbearance usually lasts six months, and just like with a deferment, the total number allowed over the life of the loan is limited.
- Cancellation: This means your loan is permanently canceled and you are no longer obligated to repay it. Not just anyone can qualify for a cancellation, otherwise everyone would be doing it. This may be allowed if the borrow dies or is permanently disabled or if the borrow takes a job teaching needy populations in certain geographic areas.
There is no guarantee that you will qualify for any of these options. If you are considering it, you'll need to fill out the appropriate paperwork from your lender, attach any necessary documentation, and follow up to make sure that your application has been received and processed.
Take the Deduction
It may be little consolation, but you may be able to deduct some of the interest you pay on your student loans. Hey, every little bit helps, right, so use your loans to your advantage. Be sure to consult a tax professional about this deduction.
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