Whether you’re a fresh grad or you’ve been in the workforce for a long time, student loans are a financial burden. And more and more people out there are facing student loan debt these days. Student loans now top an astonishing $1 trillion in the total amount owed, and that number is increasing every day.
With so much at stake, it’s vital that you protect your finances from being negatively impacted by student loans. Since they are the one type of loan that cannot be discharged in bankruptcy, you’ll want to stay on top of the payments as much as possible.
Here are a few tips for how you can keep student loans from becoming an overwhelming obligation.
Pay On Time
One of the few good things about student loans is that they can help you improve your credit score. Of course, in order to do so, you’ll need to make your payments on time. The easiest way to do this is to automate your payments so that you have money transferred directly to your student loan accounts whenever you are paid. Set up automatic withdrawals from your bank account, and you’ll never miss the amount, as you’ll be living on what income you have after you’ve already made the student loan payment. This also gives you the peace of mind of knowing that your student loan payments are taken care of. You can always log in to your account online to double check that the payments have gone through.
Over time, you’ll see your principal decrease and your credit score improve. When you have the money to do so, pay off more than your monthly payment. You’ll see the amount owed go down at a faster pace.
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Student Loan Forgiveness
In certain jobs and situations, you can have your student loans forgiven. In fact, as many as 1 in 4 Americans may qualify. Many of these forgiveness programs only work if you took out student loans directly from the government. If you took student aid from a private lender, these programs will not help you. They usually require years of payments before they are forgiven, so they won’t work if you need to have your loan forgiven quickly.
Your profession makes a big difference in whether or not a student loan forgiveness program can help you. If you work a public service, government, or non-profit job, then you can apply to have the rest of your loans forgiven. There are certain conditions that you’ll need to meet, including making 120 payments since 2007. You can check here to see if you are eligible for forgiveness.
You may also be eligible if you’re a teacher. In the Teacher Loan Forgiveness Program, teachers qualify to have up to $17,500 of their Stafford or Perkins loans forgiven, as long as they work in at designated low-income elementary or secondary schools.
Depending on how much you make, you may also qualify to have your loans adjusted so that the payments are a more realistic percentage of your income, under a program called Income Based Repayment. Again, these only apply to certain loans. You will need to check to make sure you are eligible, which you can do here. To read more about the program, go to the Department of Education website.
If you learn about all the options and choose the right path for you, then you can pay off those student loans while still living your life as you wish – and without damaging your finances.
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