The average U.S. college graduate is between $20,000 and $150,000 dollars in debt from student loans. Paying off your student loans can be a stressful situation. It is nice to know that you can pay off the debt with time and a good budget.
Something that is needed to start as early as possible is a practicable budget. When trying to create a budget you need to remember a few things.
- Determine the funds needed on a monthly basis.
- Allocate funds for your bills and then general expenses.
- Reduce the unneeded things or trade up for less expensive to help save money.
- After all required monthly expenses are paid you can have leisure money.
These can help you to reduce the chances of you getting into debt deeper than the expected student loan debt you already have. There are some things that you can do once you are having trouble paying off your student loan debt.
- Consolidating Debts
- Adjusting or Switching Repayment Plans
- Obtaining deferment or forbearance
There is a certain amount of the student loan debt that the federal government opts to forgive. There are only certain types of student loans that a forgiveness plan can help with.
- Direct Consolidation Loans
- Stafford Loan
- Federal Plus Loan
- Perkins Loan
There are different standards for each type of loans forgiveness plans. It is also important to at least attempt a good-faith means of repayment. When filing for forgiveness during a bankruptcy is only effective if you can prove that you are not able to provide for your family.
When paying off your student loans you are able to wrap your other debts with a consolidation plan. This is commonly done by getting a loan from a bank larger than all of your debts combined, paying them off and then only having one bill per month, the new loan. Sometimes rather than taking to loan directly out of the bank, the bank may take over by paying your debts. This can also mean that you are charged a monthly fee by the bank. This can make things easier by only having to worry about many payments, but only one per month. Another benefit to this type of debt help is that it can reduce your interest fees, through a cheaper new loan.
Adjusting or Switching
Another option for paying off your student loans is to adjust or switch your repayment plan. Federal government and private student loans can allow you to extend your repayment beyond the typical 10 years. These options have both pros and cons to it. No matter the type of student loan the pros and cons appear to be the same.
- Reducing monthly payments because of a longer repayment period.
- Maintaining good credit by on time payments can help you gain lower interest rates.
- Repayment plans are more widely accepted by private lenders.
- You can end up paying more in the long run because of the extended time.
- Your budget will be affecting for a more extended period of time.
Switching your repayment plan to something more usable can also be an option. There are seven different types of plans that you can switch to when trying to find a better way to pay off your student loans.
- Standard Plan
- Graduated Plan
- Extended Plan
- Income-Based Plan
- Pay as you go Plan
- Income-Contingent Plan
- Income-Sensitive Plan
Each of these plans offer different types of benefits. An example would be that a standard plan has low interest rates, where as the income plans focus on low monthly payments. You should always choose the plan that is best for your needs.
Deferment or Forbearance
This option could be helpful when trying to rebalance your budget to begin paying off your student loans. These plans can offer you the ability to temporarily reduce the amount due monthly, or even to postpone your payments.
- A deferment permits you to skip making payments for a designated amount of time. There is also the option of the interest to be waived as well. This is something that is possible in most of the federal loans that you may get.
- Forbearance is similar to a deferment. You are given the grace period where you are not required to make your monthly payments. However the interest rates on the loan will in fact continue to accrue.
Be sure that when you discuss a deferment or forbearance with a lender that you don’t decide on something you can’t follow through with. They monthly payments only disappear for a short time, but will return after the designated amount of time. Try to start a planning how to pay off your student loans before you graduate.