How To Handle Student Loans Effectively
If you’re new to college and looking to utilize student loans to help you afford your classes, it is crucial for you to understand how to handle those loans appropriately. Student loans are not free money, you do need to pay them back, and you cannot get away from this debt if you decide you cannot afford the payments you must make when you graduate. Student loan debt is crushing more than half of Americans who’ve graduated college, and you don’t want to be one of them. If you choose to take out federal student loans and stop paying them, the court could hold your wages as the property of the debtor. These loans never go away. Private loans can only be forcefully collected with legal action within the statute of limitations in your state, but it’s better to know how to handle student loans before they are out of control.
Start reading to learn the basics of handling student loans effectively now.
Shop Around
First thing's first: shop around for the best possible student loans. Sometimes one loan is better than another in terms of interest, repayments, or other factors you need in a student loan. Shopping for the best loan helps guarantee you get the best rate, which means you’ll have the lowest necessary payments and owe the least amount of money possible when you graduate. It’s also crucial to shop around for the loans you need rather than the ones you are given. If a bank offers you $25,000 in student loans, but you only need to borrow $10,000, resist the temptation to take the full amount offered. It’s one of the biggest mistakes people make when they take out loans. Many believe the rest of it is free money, and they forget they still need to pay the money back with interest. This can get quite expensive, even so expensive it becomes unaffordable for many families.
Continue reading to learn about how payment plans help with managing student loans now.
Payment Plans
Payment plans are available to anyone having trouble making their payments. Although repayment plans in the traditional sense are the preferred method of repayment, they are expensive. Thankfully, you can opt for an income-contingent repayment plan, otherwise referred to as an income-driven repayment plan, to better handle your student loan debts. The loans are repaid using only what you can afford based on your income taxes and other income you have or pay. If you are worried you cannot afford your repayment plan, this might be the best option. While it does increase the amount of interest you need to pay over the loan's life, it does give more leeway in the immediate future and allows you to pay what you can now. Paying your loans with an income-based plan is useful for many students, though you can always call your lender and see if you can work out a new payment plan too.
Continue reading to learn more about more money helping manage student loans.
Earn More Money
It’s an easy answer, but it’s not one many individuals want to hear. Almost everyone wants to earn more, but they typically fall into two categories. Either they don’t know how to earn more, or are simply not willing to do the work to earn more. However, it’s common to feel a little of both. If you’re working a traditional 9:00 am to 5:00 pm job as part of your career, you might wonder how you’re ever going to move up to make more than you’re making now.
The truth is many individuals create their own additional income on the side, often through starting a business at night or on weekends, getting a second job, or freelancing. These are all wonderful ways to earn more money to help you pay down the total cost of your student loans. However, you must take advantage of these opportunities when they’re presented and create them when you don’t have other options. If you can earn more money, you can pay off your student debts faster.
Continue reading to learn about deducting loan interest.
Deduct Loan Interest
Student loan interest is deductible, but only if you are making loan payments. The current tax laws allow you to deduct loan interest on your student loans if you fall within specific parameters. Specifically, if you are a single tax filer with an adjusted gross income of less than $80,000 per year, you can deduct your student loan interest. However, if you’re married and you file a joint income tax return, you do not get to deduct this interest if your income exceeds $165,000. If you are not sure how to do this, read about the tax laws on the Internal Revenue Service’s website or find out how these laws are made by speaking to your accountant. You can deduct as much as $2,500 in loan interest, which is a nice amount of savings on your income tax return. It can sometimes allow you to receive a refund, which you can then use to help pay off your loans.
Continue reading to learn about not putting off loan payments.
Don't Leave It Until Graduation
Don't leave managing your student loans until graduation. Graduation is the time you’re required to pay off your student loans, and many individuals appreciate that, as they may not have the time to work while taking classes full-time. The idea of not being required to make monthly payments toward your student loans until you graduate is a nice idea, but it’s not helpful in the long run. If you can afford to pay even a few dollars per month starting right away, be sure to do so. Paying off even small portions each month before you graduate can save you thousands of dollars in interest. Some loans will have a grace period after graduation in which no interest is accrued, but interest will start increasing the amount you must repay. Thus, paying off your loans as much as possible faster makes it much easier to become debt-free sooner and get your life focused on where you truly want it to be.
Student loans aren’t easy debts to pay off as they are so expensive, especially when interest is considered, and starting now is one way to help get them paid off faster.