Student loan debt affects not just graduates, but anyone who financed college. In fact, the concerns may be greater for those who didn’t graduate because they may have a lower earning capacity.
Don’t let student debt force you to delay major life decisions, like marriage, home buying, children, or saving for retirement. Here are some tips on how to manage your student debt.
Paying off Student Loan Debt
Here are some tips on paying off debt load:
- Consider paying off higher-interest-rate loans first, and check to see if your loans are variable, as interest rates may rise from current low levels.
- Use an automatic-debit program for discipline and to avoid late payments.
- Try to pay extra money whenever possible.
- Opt for a bi-weekly rather than a monthly schedule, which means less interest accumulates between installments.
Maintaining Your Credit Profile While Paying off Student Debt
You need good credit for lifetime borrowing, so it’s critical to avoid missing a payment or to defaulting on debt. In fact, repaying your student debt responsibly may actually help you to build a credit history.
Your credit score, which falls somewhere between 300 and 900, is based on a mix of factors, including your payment history, types of debt, the amount you owe, your debt-to-income ratio, and any new loan applications. Obtain free annual credit reports from Experian, TransUnion, and Equifax, making sure they are correct and up to date. You may find you can improve your debt-to-income ratio by establishing a graduated repayment option, with smaller repayments coming earlier.
Consolidating and Refinancing Student Loan Debt
If you’re looking to lower your interest payments, most federal loans are eligible for consolidation, which can stretch your repayment window. Private loans may not be consolidated, but can be refinanced through private lenders, as can PLUS loans made to a student’s parents. If borrowers cannot make the payments that are due of their student loans, they should contact their lenders to determine if they qualify for an alternative payment arrangement.
Centralizing your college debt obligations on one fixed-rate loan can help you avoid variable-rate loans. There are some downsides, however. You’ll increase the total amount of interest paid on the loan, and you may sacrifice some advantages of your initial loan arrangement, like interest rate discounts, principal rebates, or loan cancellation benefits. You may also lose the right to participate in income-based repayment plans, which structure payments according to your income rather than the original loan terms.
Consolidation may affect forgiveness programs, which allow writing off debt for graduates who enter certain fields in underserved communities, including public defenders; medical, dental and mental health workers; firefighters; teachers; nurses; and librarians.
Even though graduating students as a whole will incur substantial education-related debt, there are ways to mitigate, consolidate, or eliminate that debt in a timely fashion.