7 Steps to Help You Pay Off Your Student Loans
Student loan debt has become a normal part of attending college. It can be shocking to realize just how much you owe once you graduate. Your student loan payment can hold you back from doing the things you love, it takes a portion of your income that you could use to reach other financial goals. Your student loan payment can also make you unwilling to take risks when it comes to your career or other options. It is important to tackle your student loan debt as quickly as possible. You should make tackling your student loans part of the financial plan you create when you first graduate from college.
The first thing you should do is to consolidate your federal student loans into a Federal Direct Loan. Most recent loans should be this type of loan, but if you started classes several years ago, you may have loans at different banks. Consolidating your loan will qualify you for student loan forgiveness programs and make it easier to pay one monthly payment. It will also give you the opportunity to lower your monthly payment and extend the term of the loan. This may be crucial if you are not making as much as you originally expected during the first few years of working.
You need to create a debt payment plan for your student loan debt. You can include any credit card debt and car loans on this plan, as well. You will want to prioritize the debts based on the interest that you are paying and tax advantages. This means that you put your federal student loans last since you can claim a deduction based on student loan interest you pay, while you work on paying off your private student loans more quickly. This plan can help you focus your efforts and make it easier to get out of debt.
Once you land your first job, you need to set up a tight budget that will limit your spending so that you have extra money to put toward your loan payments. When you land your first job, it is essential to set up a realistic budget that allows you to move forward on saving and getting out of debt. Making the sacrifices now when you are used to being broke is easier than trying to cut back after you are used to spending a lot of money each month. Your budget can help you identify areas where you can cut back on your spending. You may be surprised at how much money that is once you write everything down.
Look around for things to sell or find extra money in your budget to speed up the process of paying off your student loans. You can use any signing bonus you get with your first job toward your student loans. You can also hold a yard sale or sell items online to find extra money.
If you are overwhelmed by your student loan debt, particularly if you have a lot of private student loan debt, you may need to take on a second job. Look for a job that will make working worth your time. A job that offers tips is always a good choice, but you may be able to earn more as a freelancer or as a tutor. Look at your job skills and then explore options that will allow you to make the most of the time that you are investing. Then apply the extra money you make toward your student loans.
Apply for Income Based Repayment
You can apply for the income-based repayment program if you are having a hard time making payments. The program will base the amount of your payment on your household income and number of dependents. You have to reapply each year, and as your income increases so will your monthly payment. If you make on-time payments under this program for thirty years, the remainder of your loan will be forgiven. This program only works for federal student loans. You may also want to consider the Pay as You Earn program.
If you work as a teacher, you can qualify to have your student loan debt forgiven after five years. You may qualify for a similar program if you work for the government or for a non-profit, although the length of time is 10 years. The Teach America program or the AmeriCorps program also offer programs that can help you pay off your student loans. Some hospitals may offer forgiveness programs if you work in inner cities or rural areas. See if your current job offers some sort of help with student loans as well.