8 Ways new graduates can get out of their student loan debt

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By: Barbara Delinsky
on 1st Aug,2017

Due to the rising education cost, most of the students have to take out a student loan, to finance their studies, which they have to pay off. Here are 8 ways newly graduates can get out of their student loan debt with ease.
8 Ways new graduates can get out of their student loan debt
According to a Federal Reserve report, in our nation, the total student loan is $1.3 trillion with a
delinquency rate of 11%. Unfortunately, the huge student loan debt burden is driving students to think negatively.

In the recent past, a college financing survey was conducted by the Consumer Reports National Research, among 1,5000 students.

As per the survey result,

  • 45% of students agreed that college degree was not worth the money
  • 38% of students didn't complete studies
  • 69% of students have had difficulty making loan payments
  • 47% of students wanted to go back to the time again. They said they would like to take less financial aid and find out other option (less expensive school) instead of taking out loans.
  • 78% of graduates are earning less than $50,000 per year.

Most of the graduates are regretting their decision. It has also been said that this regretful student loan scenario is the result of the bad economic condition and poor political decision.

However, a student who took debt to complete the studies, should take proper action; otherwise, the financial condition will become a nightmare.

You may have gone through many ideas to get out of the student loan debt.

These points may help you to wipe out student loan debt, especially who have been recently graduated from school.

How can new graduate can give student loan debt a miss?

It takes a lot of time to see changes in the political and economic situation. So, rather than waiting, take action to manage your loans like a professional.

According to the financial experts, new graduates usually make blunders with their loan. Right methods and strategies can help them to be debt free. Here’s how:

1 Don't miss a single payment

As per Consumer Financial Protection Bureau reports, nearly 7 million students were in default with their student loan debt in 2015. Missing debt payments is one of the big reasons.

They agreed that missing a single payment can even make a big difference.

If you miss a payment on federal loans, you'll be delinquent, and the late fees will be added onto the balance.

They also warn if the loan goes to the collection agencies, then you may end up with 18% to 40% added to the total outstanding balance.

If you miss payments for 9 months, then your credit score will damage, and you'll be excluded from the government-sponsored student loan repayment and forgiveness programs.

If you have private student loan debt, then the missed payments’ impact will be more daunting.

2 Be familiar with the options and grace period

As per the financial experts, students should keep track of the balance and repayment status of each of their student loans. It may help them find out suitable repayment option or loan forgiveness program, if required.

On the other hand, students should be aware of the grace period, because it varies on loan types.

Remember, knowing the grace period helps to make the first payment on time.

3 Try to make some extra payments

Experts suggest that making extra payments help to shorten the repayment journey.
The add- on benefit is, you're saving money on interest.

Remember, only minimum payments will make you carry the burden lifelong.

4 Find out options instead of panicking

Unemployment is another issue, which is making the student loan debt scenario worse. But, you shouldn't panic.

As per the experts, picking the right repayment option is important.

They say, unexpected health issues, unemployment, less income, and financial hardship may come to you, but believing that you have no option is a mistake.

A borrower should find out more options that are available.

Some income-driven repayment plans are available for federal student loans.

For instance:

  1. Deferment and forbearance are the legitimate ways to postpone federal loan payments for a stipulated time.
  2. If you're unemployed right now, then deferment may be the right option for you.
  3. Under the PAYE (Pay As You Earn), a borrower can limit the monthly payment to nearly 10% of the discretionary income.
  4. If your income is lower than your need, you may consider IBR (Income Based Repayment). It gives more flexible option than any other repayment plans. However, you have to be eligible for this plan.

However, you should know the eligibility criteria and other terms and conditions before making the final decision.

You should browse online to know other repayment options in detail.

5 Know when to refinance your loan

Student loan refinancing is another good way to pay off existing federal or private student loan debt at a lower interest rate.

The main disadvantage is, in federal student loan refinancing, you may lose the borrower protection offered by the government.

According to the experts, refinancing is beneficial to pay off private student loans.

Students, who have the federal student loan, can also opt for the refinancing option; but, it’ll be beneficial only for them who don’t want to take advantage of income-driven repayment plans and want to get out of the student loan debt fast.

6 Target the most costly loan first to pay off

If you have private student loan along with the federal student loan, then consider paying off the private student loan first, since they have higher interest rate and no such flexible options are available.

7 Consider financial wellness and loan forgiveness program

You can consider financial wellness program to get student loan assistance benefit.

For example, Inceptia (a division of National Student Loan Program (NSLP), a non-profit organization comes with expertise in higher education access, student loan repayment, analytics, default prevention, financial education, and verification.

You can get guidance on student loan repayment lesson, counseling and strategies to get out of your student loan debt burden.

It provides online financial education services as well. Visit fa.financialavenue.org for more information.

A loan forgiveness program is also a good option, but it is based on some criteria.

Teachers, nurses, AmeriCorps and PeaceCorps volunteers are eligible for federal student loan forgiveness programs. You Can visit https://studentaid.ed.gov/ for more information.

8 Consolidate your loan in a right way

Taking out a consolidation loan to mitigate student loan is enticing, but it has some disadvantages as well.

For example, you can take out a private student loan to pay off all your existing student loans (federal and private). Thus, if you consolidate the federal student loan into the private students loan, you will lose all the repayment option and borrower benefits, which are available for a federal loan.

It's also important to use a calculator and shop around to find out a consolidation loan with low and fixed interest rate.

Final thoughts

You should take the right action to get rid of your student loan debt. Talk to a financial advisor to know about to the best-suited repayment plan for you. Also, adopt some lifestyle changes to set save some money. Remember, making extra payments will help you to get out of your financial obligations fast.

Today's effort and struggle will save you from the painful debts in the future.
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