You cannot put a price on a good education. By obtaining a bachelor’s or master’s degree, you open the door to better career prospects and job opportunities. However, paying off your student loan can get in the way of your future financial goals. Here are some ways to deal with your debt and get it out of the way as soon as possible.
Start Work in College
The best time to start addressing your debt is before you leave school. Working part-time while attending college or university is a great way to get a head start on repayment. There are many jobs around campus such as library assistants, café baristas, or recreation center workers that will allow you to schedule work around your classes.
If you prefer to work off-campus, casual jobs like tutoring, babysitting, waiting tables, or delivering food have flexible hours and can pay well. Even if you earn only a few hundred dollars a month, it will deduct a significant amount from your debt over the year. Plus, you will be too busy to spend any money. Just make sure that your part-time job still affords you ample study time.
Keep a Strict Budget
If you are working your first job out of school, it can be difficult to know how to manage your finances. Shopping and eating out can quickly get out of hand and you may find yourself struggling to pay off your debt. Developing a budget that includes loan repayments and savings goals can help you to have a clearer idea of how much you can realistically spend.
Better yet, enroll in autopay and let your student loan servicer automatically deduct payment from your bank account or credit card each month. This will prevent you from skipping out on loan repayments and being faced with late fees or a credit score penalty. As a perk, most lenders offer a slight discount on interest rates for individuals who enroll in autopay.
Make Extra Payments
Paying more than the basic amount every month can help you to get rid of your principal debt faster. It also reduces the total amount of interest that will accrue over the lifetime of the loan. If you are unsure that you will always have extra money, you can do this on an ad hoc basic and just send in an additional check when you can afford it.
When your financial situation is stable, you can increase your monthly payment amount or make a payment every fortnight instead of once a month. Be sure to inform your loan servicer to apply your extra payments to the principal balance. Otherwise, they may simply hold your additional payments and mark your account as ‘paid ahead’.
Consolidate Your Loans
If you took out multiple federal student loans, the combined monthly payments can be a huge burden on your finances. You can consider combining your federal student loans into a single loan known as a Direct Consolidation Loan. This will simplify the repayment process and you will only need to make one payment a month, enabling you to manage your finances better.
Be Aware of Benefits
Did you know that you are eligible to apply for a federal tax deduction of up to $2,500 on interest paid on student loans? The total available deduction depends on your adjusted gross income and is applicable whether you have a private or federal student loan. The money that you save on your income taxes can be put towards your loan repayments, further reducing the debt.
Additionally, some companies have student loan repayment programs as part of their employment benefits. This could add over $1,000 a year to your loan repayment. If you work for a qualifying public service employer or non-profit organization and have made payments for ten years, you may also be eligible for Public Service Loan Forgiveness (PSLF).
Apply for Loan Forgiveness
Aside from the PSLF, there are other avenues for loan forgiveness such as the Teacher Loan Forgiveness program or an income-driven repayment program with a 20 or 25-year repayment term. However, these programs have stringent requirements and getting approval can be challenging. Furthermore, they only apply to federal student loans.
For individuals who have taken out private student loans, settlement negotiation is your best bet. Private student loan negotiators can help you and your loan provider reach a settlement sum that can be less than half of the total loan amount. They can even help restore your credit score. Read more to find out how private settlement negotiation can work for you.
Do not let your student loan overshadow the achievement of earning a graduate or post-graduate degree. By managing your finances and taking conscientious steps to address your debt, you can pay off your student loan quicker than you think. If you are trapped under the burden of a private student loan, speaking to a settlement negotiator can help you regain financial freedom.