There is more than $1.5 trillion of student debt owed by more than 44 million people in the United States alone. If you are one of them, then it is important to stay current on your student loans as it can impact your credit score and your ability to do other things with your life. However, making large payments each month can be very difficult. There are many ways that you can get current, stay that way and pay off your student debt. Consider these options and choose the ones that are right for you.
Understand Your Student Loan
The first thing that you need to do is figure out your loan situation, and who you owe money to. If you already know, that’s great, you’re just one step ahead. There are many different kinds of loans, and it’s essential to be educated on their differences. Federal aid grants and subsidized and unsubsidized loans are offered by the federal government to help more young people receive a good education. You gain access to these from FAFSA. There are also private student loans which are generally given by a bank and are usually not a great idea unless a student is desperate. Now, make a list that is complete with the principal amount and the interest rate on all balances you owe. While your list may look overwhelming, taking this first step is essential to paying back your student loan. Then, put your debts in order from smallest to largest so that you are organized when you’re ready to start paying them back.
Pay Your Loans
Now that you know the amount due, it is time to figure out a plan to pay your student loans. You may want to work an extra job so that you can pay your loans off faster. You may also want to consider consolidating your loans so that you have only one payment to worry about each month. Usually, the best policy is to pay more on the smallest one until you eliminate it while making the required payments on the others. Then, move on to the next smallest one until you have eliminated all your student debt.
Lower the Principal Balance Due
There are many different ways that you may be able to lower the principal balance due. Paying extra is obviously the most straightforward way to reduce your principal, but it’s not the only way. If you do not make enough money, then the government may forgive part of your loan. There are also federal and state programs that may forgive part of your loan in exchange for working in a particular area or field. The Teacher Loan Forgiveness Program and the Public Service Loan Forgiveness Program are two examples. Understand that they may only forgive part of your loan depending on the type of loan you took out during school.
Work During School
Keeping your loans current while going to school can help you pay them off sooner after you graduate. Remember that some loans like Federal Unsubsidized Loans and Federal PLUS loans accumulate interest while the student is going to school, so working enough to not need these loans can often keep the balance substantially down. Students need to weigh the impact that paying their loans will have on their academic progress.
Keeping your student loans caught up or paying on them ahead of time can raise your credit score and set you up for future success. Not paying off your student loans or not taking them seriously could cost you hundreds or thousands of dollars in the future and could even lead to bankruptcy, which could cause severe complications to your financial future.