Money borrowed to earn more money
in the future - this is precisely what a student loan is. Not many students
with loans realize that they have a burden to offload before they set off to
reach their goal. A college loan is one of the priciest debts that a person
might come across and he/she might take several years to repay these loans. Careful
planning and following the plan meticulously can help students pay off their
student loans quickly.
A recent survey conducted by the National Center for Education Statistics confirms
that about 50% of college graduates have student loans these days. The average
loan debt per student is around $10,000. Few students have no choice but to opt
for a student loan to complete their college education. The large sum of money
borrowed to fund your education cannot be repaid easily. Debt consolidation,
negotiation and credit advice help students pay off their student loans
successfully. Do not worry if you have trouble repaying your monthly loan
installments as student loans can always be renegotiated.
College loan basics
Decide on the loan amount: Never borrow more than what you need.
Borrowing excess money could mean prolonged repayment tenure and hardship for
Do not use loan money for other purpose: Money borrowed for college
education should be used for the same. Do not borrow for college education and
spend it elsewhere.
Decide on repayment options: When you borrow for your college
education, start planning for the repayment. Work out on methods of repayment.
Adhere to your repayment options: Once you plan a college loan repayment
program, adhere to that plan.
Student loan repayment
Student loans can be repaid using the below mentioned four
Standard payment: Loan is repaid every month for a period of ten
years; a fixed repayment amount has to be paid throughout the loan tenure. This
option offers the best interest rate and high monthly payment.
Graduated payments: These loans are suitable for people beginning
their career with a moderate salary and are looking forward to a rise in their
income in the future. Small amount of loan repayment every month, repayment
amount increases with increase in salary, loan period extends from 10 - 30
Income-based payment: This loan repayment method is suitable for
people who are seasonal workers and people who get paid on commissions. This
plan is an income-based plan and repayment is calculated based on income. Monthly
repayment is proportional to income and it takes nearly 15 years to repay the
Long-term payment: This repayment method permits you to pay a
minimum amount for every month and the loan term extends from 10 to 30 years. The
interest rate is pretty high when compared to other repayment options.
Repaying college loans
Not many students land up in a dream job where they can earn well. Few students might not even find a job
after completing their education. This simple guide gives you the various
options for college loan repayment:
- If you have landed up in a job that pays you less,
settle on increasing the term and decreasing the loan amount. You can get
the option of paying smaller amounts for a longer period, but the interest
rates for such loans will be a little higher as the tenure has increased.
- Consolidate your payments; this will enable you to
make a single payment instead of many small loans.
- If the borrower faces financial hardship,
unemployment or decides to get back to grad school, he/she can request for
deferral of loan repayment. Delaying your payment will give temporary
relief from repayment but will attract heavy interest.
- If the borrower finds a decent paying job, he/she can
use extra cash to pay off student loans.
- The borrower can choose to work for organizations
like Americorps, teach for America,
etc. Working here qualifies the borrower for grants and these institutions
will repay the loan amount. Few occupations have the concept of forgiving
loans while they recruit fresh student with student loans, e.g. teaching
for a low-income school.
College loan repayment tips
Follow these simple but effective tips to repay your student loan:
Plan a strategy: Plan a strategy to repay your student loan before
you complete your graduation.
Apply for scholarships: Apply for as many scholarships as you can,
despite the fact that funds have been reduced from the budget for college
scholarships. You can check with your campus financial aid office about
financial aid programs that the schools offer to students. The Internet is
another place where you can hunt down scholarship offers.
Apply for grants: Apply for as many grants as possible. You might
hit upon good deals as these institutions forgive student loans too.
Work while you study: Try and get a work-study job so that you can
clear off your student loan. Your college campus employee office can help in
Work as a volunteer: Working in schools that have shortage in
teachers, working for low-income group student or for Americorps can help you
reduce your student loan.
Check before you consolidate your loans: Consolidating various
student loans into one can sound like a great option, but remember you might be
eligible for student loan forgiveness plans.
Save money to repay loans: Get into a summer job and earn money.
Save this money in schemes that offer high interest rates, use it to repay your
Never delay loan payment: If you delay your loan payment, you will
be judged under bad credit category. If you find it difficult to repay your
loan, notify the lender and request for a hardship or loan deferment until you
are in a position to repay your loan.
The government offers the below
mentioned options to students who are unable to repay their loans.
Forbearance: A provisional postponement or reduction in installments
for a predetermined period of time. The interest on the loan amount will keep increasing
but there will be some immediate relief on the monthly installment.
Income sensitive and graduated payment plans: This scheme is offered
to people who have difficulty in repaying their student loans. The amount of
money you repay will increase and decrease as per your income.
If you are already a defaulter, you should take the
advice of a debt consolidation organization. They can help you reduce the
interest and fees that you owe towards your student loan and can also help you repay
the balance quickly.