Stay Smart About Student Loans

The worst part about college isn’t midterms or pesky required classes that seem to have nothing to do with your major. No, the worst part is all the bills and high costs of a higher education. Though some of us are lucky to get great scholarships or just have really rich parents, many are forced to turn to loans and grants to help them with their mounting dues. Unfortunately, taking out loans can lead to massive debt. Even senior citizens are still seeing the burden of their college education with debt hanging over them. Even more unfortunate, with the economy and job market, is that this could be us in the future!

Before you find yourself in massive debt and wishing you could win the lottery to pay it all off, you should learn about alternatives to loans or the best ways to deal with paying back loans. One of the best things you can do for yourself is to keep on top of scholarship opportunities, whether it’s through your college specifically or through an organization. Pay attention to emails from your college, bulletin boards at school, and do some digging on the Internet. Though scholarships can sometimes be very specific with requirements or low sums of money, it’s still better than nothing and can at least cover the cost of books for a semester. Also, keep in touch with your advisor who may know of other scholarships or grants more suited for you and your major.

For those of you already in debt, take a deep breath and let it out. If you can’t make payments due to an illness, unemployment or any other unexpected issues, you may be able to delay your payments, known as a deferment or forbearance. But, make sure after discussing with your lender you understand any penalties there may be—which generally means more interest and more money owed. When you do get back on your feet, always turn to the most expensive loan with the highest interest rate first (these are usually private loans). This way, once you climb the mountain, you can roll on through the lesser loans and have much less stress. You can also lessen your future burden by trying to lower your principal. When making a loan payment, the money goes toward the interest, any late fees and then the principal. Whenever you have some extra money on hand, try to pay more than what you owe that month. By doing so, you will lower the principal which in turn will lower the amount of interest, ultimately saving you money!

Other options to make your debt more manageable are checking out your qualifications. There are the opportunities for debt forgiveness, though you shouldn’t rely on this as a way to get out of debt. Based on your line of work, you might qualify to have some of your debt cancelled out. Also, volunteering with certain organizations, like the Peace Corps or AmeriCorps, can help drop the amount you owe. You could also potentially qualify for income-based repayment, or IBR. If you have a lower income that can’t accommodate high loan payments, this may be the option for you to lessen some of your burden by lowering your monthly payments and spreading the loan out over a longer payment plan. Additionally, if the IBR payments you make are less than the interest your loan gathers, the government will cover the interest for up to three year. After 25 years, if you’re still making payments, the debt will be forgiven. But remember, using IBR will keep you in debt longer with more interest.

Most importantly, don’t ignore your loans. Stay organized and on top of them, know the grace periods and lenders well to help keep you out of trouble. Set up automatic payments to make sure you’re never late or miss a payment completely. Not paying your loans has serious consequences. After nine months of not paying, you’ll enter default which means you owe your total loan all at once and it’ll be much higher than you ever expected, your credit score goes out the window, and if it’s a federal loan the government can seize tax refunds and withhold your wages.

Just remember to breathe. You’re not the only one in debt, and one way or another it will all work out. As a college grad, you’re certainly smart enough to manage your loans and get them paid off before your 75th birthday. Best of luck to you all!