With student loan debt nearly doubling over the past decade, many newly graduating students are feeling the financial pinch. If you’re overburdened with student loan debt, there are several ways to attack it head on, including lengthening the repayment period, changing the repayment period, getting a deferment, getting the loan forgiven or debt consolidation.
Most graduating college students are on a basic repayment plan to repay their students loans within 10 years. Overall, you’ll pay less with the interest compounded for a shorter period of time than with a longer repayment period. However, the monthly payment for a 10-year repayment plan is often too high for many. In that case, it may be better to extend the repayment plan even through it will cost you more in the long run. In order to qualify for an extended repayment plan, you must have more than $30,000 in student loan debt.
If you don’t qualify for an extended repayment plan, you may be able to change the dynamics of repayment. There are different agencies that offer the option of starting out with low payments that gradually increase every two years. This option works well for some who are in low paying jobs but will earn more in the future. These income-based repayment plans are offered for 10 or 25 years and are based on income, family size and state.
Deferment and Forgiveness
If you just can’t afford to pay off your student loans, you can request a forbearance or deferment. This delays the time in which you have to start repaying the student loan. Typically, payment is postpone for up to a year. Deferments are allowed for unemployment, national service, enrollment in school, military deployment and economic hardship. Deferments are also allowed for specific internships, such as dental or medical. Federal student loans can be forgiven with certain kinds of volunteer work. Just keep in mind that private student loan providers may not offer this option.
Debt Consolidation Help
Debt consolidation help is another effective strategy when paying off student loans is a real hardship. Often, college students graduate with several loans at various rates. With debt consolidation, you can lump all of your student loans together and usually grab a low interest rate. The biggest advantage of federal student loan consolidation is that monthly cash flow improves right away. With a low interest rate, you can reduce a student loan payment of $600 a month to $200 a month. Not only do you have a doable payment, the interest rate is locked in. It’s also worth mentioning that student loan interest payments may be tax deductible.read more