How to Survive the Student Loan Crisis
Right now ‘STUDENT LOAN CRISIS’ seems to be the words on everybody’s lips. From presidential candidates to worried freshers, the key topic of conversation is ‘what on earth can we do about student debt?’. And with good reason – the US student loan debt is at 1.4 trillion dollars and rising fast. If you are taking out loans now, or have already graduated and are worrying about how to pay off your debt, this is the article for you, here we review all the possible ways of surviving, reducing, paying off or eliminating your student debts. Think smart, reduce stress and find the best solution for you!
Understanding your loans:
The first step towards conquering your student loans is to really understand what you’re dealing with. The majority of borrowers just focus on trying to meet their minimum repayments, however to really get on top of your loans you need to understand how they work. Here are the 3 simple steps you need to take in order to get to grips with your loans:
1) How much you owe?
It’s no surprise really that many borrowers don’t keep track of their exact loans total. Paperwork gets lost, emails get buried and sometimes people feel more comfortable not knowing. You need to be on top of the situation, and a good place to start is to check the National Student Loan Data System to see all of your federal loans. If you also borrowed from private lenders you will need to contact them directly. If you don’t know who your private lenders are, order a free copy of your credit report which should contain your full credit history.
2) What are your payment options?
Some loans offer the chance to switch to an improved payment plan, based on what you’re earning. If you’re unable to make your payments at all, you can also apply for a temporary deferment.
3) What are the details of each loan?
If you have multiple loans, which is often the case, find out which is charging you the highest rate of interest and make that loan your priority. In addition to knowing the rates of interest, also research the minimum payment requirements and which loans have the possibility of deferment, forgiveness or a longer term payment plan.
Obama’s forgiveness plan:
‘Obama Student Loan Forgiveness’ is the more common name for a program called the ‘William D. Ford Direct Loan Program’. This is a system whereby, depending on your personal circumstances and the amount of time for which you have had your loans – you are entitled to a reduction of your loan total, reduced monthly payments and in some cases, complete forgiveness of your debt. It is possible to arrange to join the program yourself, however, many choose to use the services of a loan consolidation company such as Aidinest to simplify the process and make sure that they are signed up to the best package – as there are numerous options. Millions of borrowers have taken advantage of the benefits of the loan forgiveness program, join them by using the Aidnest contact details at the end of this article.
Depending on your loan type and your lender, you may be entitled to a ‘grace period’ after you graduate (or leave college). This is a period of time during which you do not need to make any payments towards that loan. This period would typìcally be 6 months. However, this is not a time to relax or spend money, this is the time to be smart, use this opportunity to research your loans, understand their terms and conditions and start saving money towards later payments. Make a game plan! For example, if your loan repayments are in the region of $250 per month, put that money aside ready for later repayments, not only will you be ahead of schedule, but you will already be accustomed to saving money each month.
Avoid new debts:
We all love a bit of retail therapy right? After a few years of living on a student budget and having finally obtained your qualifications, you may feel entitled to reward yourself. Don’t! That all important new iPhone, car or house can wait. The most important factor in your life at this time is to to own your debt – not material possessions. A year or two down the line when you are confident that you are in control of your student debts and earning a good salary is the time to give yourself those rewards, realistically the last thing you need right now is new debts on top of pre-existing debts.
Go easy on the plastic – the average student has well over $3000 credit card debt, credit cards are all too easy to use and often difficult to repay, and at high levels of interest, think before you spend!
Likewise if you have just started working and paying off your loans you may find that your money is not stretching to the end of the month. If this is the case; sacrifice is the answer, never take out payday loans, payday loans are a short cut from hard times to even harder times and are never the solution.
You may also need to keep your romantic side in check if you are considering getting married. True love always waits, and the average wedding in the US costs upwards of $30,000, and that’s just the basics. Think smart and control your spending and your borrowing.
Being a student gives you the great life skill of living on a budget. Don’t let that knowledge go to waste, learn to incorporate those skills into your life post-studies. Being in control of your debt is about being in control of your finances, and that means not wasting money and equally importantly, knowing how to make savings.
How does budgeting work in practical terms? Ride a bike instead of driving or taking taxis, choose an apartment with a realistic rent, cook at home, cut coupons, skip expensive nights out and have more nights in with your friends… do whatever it takes to live within your means.
Of course we would all like to earn more money, but what are we prepared to do to get it? It’s important to always be proactive (without being too pushy or demanding). Know your worth, regularly check what is the average wage in your position and industry and ask for regular work reviews with your boss. Constantly be on the lookout for new employment opportunities, a new job always comes with an increased salary. Always look for the chance to work some overtime or extra shifts. Look for a second job, perhaps an online business from home, or a few nights working in a bar or restaurant. Sell your old possessions that you no longer need. Consistently be thinking about ways to earn a few extra dollars, it all adds up, and that extra bit of cash in your pocket may be just what you need to help you through the hard times.
We’ve already discussed the importance of knowing the interest rates on your individual loans, but it doesn’t stop there. Once tax season comes around, you need to deduct your student loan interest. You can reduce your taxable income by up to $2,500 on any interest you’ve paid for that tax year. Your lender should give you this information, but you may also request it or access it online. It’s also worth considering making the interest payments if you have deferred your loan, this means that the eventual total will be lower and more manageable when the time to start payments comes around.
Paying off all of your student loans is going to make you feel great, but you’ll feel even better if you’re helping out some good causes while you do so! There are various ways in which volunteering can help with your student loan payments. If you are working in a loan forgiveness qualifying non-profit sector job, your loan can be completely forgiven after the first 120 payments.
Equally, if you are employed in a job that is ‘giving back’ to society, there are programmes that will pay off large chunks of your debt, for example, the Veterinary Loan Repayment Program will pay $75,000 towards the debts of eligible vets working in area’s with a shortage of animal doctors (for 3 years or more). The National Health Service Corps have a similar incentive which pays off $50,000 from your debts. Do some research to find like-minded programmes relating to your particular qualifications.
There are also initiatives available for people who donate time or volunteer as fundraisers. Look at pages such as www.zerobound.com or www.sponsorchange.org to find out how you can help others and reduce your debts whilst doing so.
Your qualifications make you valuable. Many cities in the US are very keen to recruit young professionals (like you) to go and make your career and life there as a resident and taxpayer. New York, Kansas, Detroit, Michigan, Niagara Falls and Saskatchewan are examples of places that offer some type of loan assistance for doing exactly that.
Of course, just like with the other student loan forgiveness options, these opportunities may well come with conditions attached. You may be required to live in a certain part of town, work at a particular company, or commit to staying for a minimum period of time.
If you don’t feel ready to rip up your roots quite yet, changing home in the city where you currently reside may also help you to save money. Moving closer to your work, finding a cheaper apartment or looking for a room in shared housing are also ways in which you may be able to reduce your living expenses.
Author: Jim Davies
Images: Courtesy of Flickr.