College debt in the US has reached $1.59 trillion according to the Federal Loan Portfolio. Overall, it is in second place among consumer debt sources, just below the mortgage. It is not an exaggeration to call this a huge problem that impacts the economy in general and individual lives as well.
Of course, student loans help many people to access higher education otherwise unavailable, which is good. But they need to be taken seriously. The earlier one learns all the pitfalls and specifics of loan repayments, interest rates, and applicable forgiveness programs, the better it is. Taking such a commitment is not something you would go into without extensive research.
In many cases, students can start repaying while still studying. Some might argue that they simply do not have time and resources to invest in this now. “When should I research loan repayment options or get a part-time job if I’m always busy with endless assignments?” This is a valid concern as college curriculums can be overloaded. It is hard to find any energy to deal with debt when you haven’t been sleeping properly because of all the essays due. But there is a helping hand out there if one struggles with their college papers.
If you need assistance or advice, you can always reach out to professional academic writers. “Can I do my paper with WritePaper writers?” – Yes, you can. They are always happy to help with tips, tricks, samples, proofreading, or even doing it all for you. It is a matter of time management and prioritization. Whether you need time for a side gig or simply to get some rest, it is completely fine to ask for help.
And as far as student debt goes, here are the main concerns one has to keep in mind.
Not Taking Responsibility Seriously
It is easy to postpone things after graduation. One might think that this is a problem of the future. But in reality, the earlier you start, the earlier you’ll be free. And the lower will the overall interest be.
When you pay extra for the principal balance, it decreases the interest rate and saves you a lot of money.
Another concern is that many students do not understand how detrimental this debt can be if they do not take it seriously. Some of the consequences of being late on payments or mistreating your debt can be:
- Inability to go to grad school or take another loan for that;
- Not being able to buy a house;
- Being unable to even rent separate living. 14 million people at the ages 23-37 are still living with their parents according to Zillow analysis of 2019;
- Putting dreams away or on hold;
- Lowered credit score, etc.
All of these issues can pile up and truly make one’s life challenging. So it is essential to finish repaying your debt as soon as possible.
Lack of Research Beforehand
The best thing one can do is to research all ins and outs before signing a loan. There are mainly two options – federal ones and private ones.
When possible, always go for a federal loan as they have lower interest rates and better repayment plans. They are cheaper, safer, and have death and disability discharges (not all private ones have those). They also allow loan forgiveness options and income-based repayment plans.
If you have to go for a private lender, research deeply all offers on the market. Look into interest rates, ability to pay off earlier, and other risks.
Taking Too Much
In the case of student loans, the less you take, the better. It is not a free service; every dollar one takes will cost them 2 dollars in the end. Take only as much as is necessary to finance your education and do not spend that money on anything else.
To decrease the amount one needs to borrow, they can:
- Apply for scholarships and grants every year of a college education;
- Work part-time;
- Consider tuition installment.
Scholarships and grants are great options for any student. There are many of them available based on different factors like academic excellence, specific subject or industry, work history, parents’ jobs, being a part of a minority group, etc. Look into the small ones as well – every $500 scholarship will take the financial pressure off you in future.
Paying Only the Minimum
The minimum payment is exactly what it sounds like. It is the least you have to pay a month. But it doesn’t have to be a total amount. After all, interest is based on principal balance so reducing it will reduce interest.
Even paying an extra $100 a month can go a long way in the end. Just make sure to let the lender know that all extra funds should go for the principal balance, not the next month’s minimum.
Student loans do not have prepayment fees, so the more you pay now the less you pay in the end. It is very simple.
Not Applying for Loan Forgiveness
If you have a federal debt, you can apply for a forgiveness program. Of course, one needs to be suitable for requirements based on the state specifics and working a public service job or non-profit organization. But if it is the case for you, do not hesitate to use this opportunity.
Not Making Extra Payments
There are two more ways to pay off the debt earlier.
The first is making extra payments. Instead of having 12 monthly payments, one can add one additional every quarter, for example. It will add up to 16 times a year. If it is possible, opt for that and inform the lender that that money should go to the principal balance.
The second way is to make lump-sum payments when possible. For example, you get a raise, tax refund, or bonus at work. This sum can be used for the principal balance as a lump sum, too. Every dollar counts.
Forgetting to Pay
One would be surprised how easily that can happen. To not forget about important details here is what you can do:
- Setting automatic payments;
- Keeping all debt information in one place, like operating several credits via one dashboard;
- Always update lender on any information changes – moving places, changing a name, or a contact number, etc;
- Making a timeline of repayment with important deadlines;
- Create financial plans.
Every one missed check can decrease one’s credit score and will come with additional fees. So it is better to not let this happen.
Deferment and Refinancing
Although both of those choices can be beneficial sometimes, it is better not to use them unless necessary.
Deferment or forbearance does not stop interest from piling up. Eventually, it will create a bigger problem. So until you can make minimum monthly payments, do so without postponing them.
Refinancing can also be tricky. Although it may lower interest rates sometimes, it is not always the case. It is a serious step that requires additional research and consideration. Just make sure it is reasonable and helpful.
Student debt is a complex issue that can be detrimental when not taken care of properly. The rules are straightforward – take only the amount you need, go for the lowest interest rate, and start paying off as early as you can.