(ThyBlackMan.com) Did you know one in five student lending borrowers have more than $50,000 in outstanding debt? Student loan debt can pile up between transferring to a different college, switching majors, or stopping and restarting school. Pursuing a graduate, doctoral, or another professional degree can lead to six-figure student loan debt. Getting a handle on that debt is easier than you think if you can create a plan and stick with it. These five tips are designed to help you tackle student loan debt head-on.
Understand the Terms
Educational lending is not ‘free money’ that comes with no consequences attached. You need to know exactly how much you’ve borrowed and from whom. The terms of the lending agreement may dictate whether you can refinance student loans or if you are eligible for income-based repayment plans.
The interest rate for each lending agreement will help you decide if you should consolidate your debts into one. Combining them into one monthly payment may lead to a lower interest rate in the long run. Use your grace period after you graduate to research what you’ve borrowed. Save your monthly payments in a savings account and create a budget that includes those payments.
What About Forgiveness?
If you find yourself unable to manage your debt, then debt forgiveness may be an option. Relocating to a new city may offer an incentive for debt forgiveness. The military also provides a student debt forgiveness plan for those who join or are already serving. Some jobs even offer student loan forgiveness as part of their benefits package. Medical, law, and veterinary fields are the most likely to have some student loan repayment-incentive package upon employment.
Income-Based Payment Plans
Many federal plans offer students an income-based repayment plan to make the debt more manageable. Students eligible for these repayment plans usually have a total debt obligation higher than their yearly salary. These plans let you make monthly payments to your lender for a set period before they are forgiven.
Take Advantage of Lower Interest Rates
You can make your education debt more manageable by considering consolidation. Consolidating all of your outstanding debt can also make it easier to keep track of payments by combining them all into one. One payment per month instead of several means you are less likely to miss a payment.
Be careful with consolidation, though ?— it is highly dependent on the type of lending agreement you have. Experts say you shouldn’t consolidate federal and private student lending. Consolidating can also lead to the loss of certain borrower benefits like deferments, loan forgiveness, or an income-based repayment plan.
If consolidation is the right choice, make sure you ask your new lender about any incentives. Some lenders offer a lower interest rate for their customers who sign up for auto payments. Automatic payments help avoid late fees and the chance you will miss a payment.
Live Within Your Means
Once you have an idea of what your minimum monthly student loan payment will be, you can start budgeting. Your bills, utilities, insurance, and loan payment should be counted among your essential needs each month.
Staff Writer; Calvin Hall