Student Loan Debt
College graduation should be a joyous and optimistic time. It is about entering into the real world and utilizing what you’ve learned for the last four years. However, for many college graduates, there is the unenviable burden of student loan debt.
According to debt.org, as of 2017, students in the United States owe approximately $1.3 trillion in debt. That means the average college graduate has to pay off $37,172 after earning their degree. To make matters worse, that figure is up six percent from the previous year.
Fortunately, there are solutions to rescue you from your mountain of debt. That way, you can get on the fast track towards financial independence. Here are three different methods to correct your debt:
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Student Debt Consolidation
Student debt consolidation is a form of refinancing. It does not come with a credit requirement and often allows individuals to lower their monthly payments by creating a single bill. Depending on the nature of the debt, people may be able to match their monthly payments to their income.
That variation comes from the fact that there are multiple types of student debt: federal and private. Federal is the one that most people recognize. It combines several loans into one through the Department of Education. The goal is to simplify the payment process, though it will not lower the monthly interest rate.
Private student loan consolidation is available for private and federal loans into one private loan. In addition to receiving a single monthly bill, you will also save money and lower your monthly interest rates. However, opting for private consolidation will exclude you from federal loan protection and loan forgiveness programs.
Deciding which option is right for you will depend on your circumstances. If you want to slightly lower your payment or wish to gain eligible for income-driven repayment, you should consider federal loan programs. They can also work for people who have recently defaulted on their obligations and want to get back on track.
Federal student loan consolidation is typically for financially stable people. That can include having an excellent credit score and a full-time job. This form of refinancing is worth consideration is you meet those criteria and have made several student loan payments already after graduating.
Deferment and Forbearance Plans
Deferment and forbearance are another way of putting a pause on payments. The idea is that graduates can gain financial stability without astronomical interest accruing on their debts. That way, when they start making payments again, they can do so without jeopardizing their present well being.
These programs last for up to three years. There will be interest on some of the loans, which lenders add to the end deferment payment. Still, this approach can be a useful tactic, especially if you are unemployed, ill, or in the armed forces.
It is worth noting that deferment and forbearance are not synonymous. If you choose forbearance, you will be responsible for the interest of the subsidized loan. Deferment, on the other hand, comes with several qualifications and will typically last for one year. Guidelines for qualifying come from the Department of Education.
Student Loan Forgiveness
No, it is not too good to be true. There are some circumstances where you can qualify for student loan forgiveness. These will depend on such factors as your income and profession.
Nurses can apply for several forms of loan cancellation. For instance, the NURSE Corps Loan Repayment Program will pay upwards of 85 percent of the existing debt. There are also free federal repayment programs through the Department of Education.
Teachers can apply for the Teacher Loan Forgiveness program if they work for five straight years in a low-income public school. The program will eliminate $17,500 in debt. There also forgiveness options for military personal, doctors, lawyers, healthcare works, and public service professionals.
Alternative Approaches to Handling Student Loan Debt
Tackling student debt often means cutting back in other areas financially. Simply put, you need more disposable income so that you can put it towards your outstanding obligations. Here are a couple of tips and tricks to make the process a little bit easier:
- Carpool when possible instead of driving alone
- Cook at home as opposed to getting takeout or eating at restaurants
- Live within your means by dressing down and buying essential items
- Make the most out of coupons, deals, and other budget-friendly offers
- Start a budget to keep track of your monthly expenses
- Minimize your highest costs, like rent and commuting, by living in more affordable housing and using public transit
Note that these are not meant to solve your student loan debt entirely. These can go a long way towards easing the strain on your wallet, though. More than anything, these recommendations involve time and discipline, and over time you will be able to reap their benefits.
Beware of Student Loan Scams
Hundreds of private companies target struggling college graduates with the promises of debt relief. What often ends up happening is that these programs put the person in a free federal program but still charges monthly fees. Make sure to keep an eye out for these potential red flags when considering a debt relief company:
- They want payments upfront or monthly fees for their services
- The company guarantees immediate loan forgiveness
- A company representative will pressure you into signing up for the program
- They ask you to share sensitive information, such as your Social Security number
- The company’s marketing approach involves social media posts and search engine ads, instead of a building a long-standing reputation
There are more than 100 companies in the United States that appear to be scams. If you do come across one of these bad actors, make sure to report it to the CFPB or the Federal Trade Commission. These agencies use customer complaints to target potentially deceitful companies, and return lost money to the individuals who need it most.
Start creating your path to financial independence with The Pope Firm. Our student loan debt experts will make sure you minimize your obligations while maximizing your potential. Find out more by calling us at (865) 324-0456 today.
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