Pesky student loan debt has its way of sticking around for what feels like forever. With interest adding even more to what you have due each month, it can sometimes feel a bit overwhelming. Fortunately, there are ways to take on your debt that can hopefully lead to less stress for you. So take a step back, breathe, and check out our tips for tackling student loan debt.
Tips For Tackling Student Loan Debt
Start saving during your grace period
This is the best time to start putting away some money for your future payments. The grace period is the time before you actually have to start making payments. Because nothing is leaving your bank account, you should consider putting some away into a savings account. Depending on the loan, you may not owe payments for six months for a Federal Stafford Loan or for nine months for a Federal Perkins Loan. That’s plenty of time to get some cash banked up before you start making payments. Be aware, though, interest on subsidized Stafford Loans begin accruing during the grace period. Make sure you check with your loan servicer if you have a private loan, because their terms may vary.
Crunch the numbers: lower payments vs less interest
Standard repayment for federal student loans typically calls for fixed monthly payments over a certain number of years depending on what your loan amount is. If you can make the shortest amount of time work, that means less interest than if the debt is paid over a longer period of time. Keep in mind that you can change your plan once a year. If your current repayment plan isn’t working out, call your loan provider to see what other options you qualify for.
Link payment to your income
The federal government offers repayment plans that limit the size of monthly payments based on your income.
The Income-Based Repayment Plan limits payments to 15% of discretionary income, which is defined as the amount your adjusted gross income exceeds 150% of the federal poverty level. Then, after 25 years, you’re done paying even if you still have a balance.
The Pay As You Earn Plan limits your loan payments to 10% of your discretionary income. Then, after paying for 20 years, you’re done. Payments through this plan can be one-third lower than the Income-Based Repayment Plan and are forgiven 5 years sooner. To qualify, however, you must have at least one loan from after October 2011 and none before October 2007.
If you don’t qualify for the first two, the Income Contingent Repayment Plan could be an option. Terms for this plan aren’t as generous and discretionary income is defined as the amount your adjusted gross income exceeds 100% of the federal poverty line. Your payment will be 20% of that discretionary income and any remaining debt won’t be forgiven until you’ve made 25 years of payments.
Get smart about payments
Make good decisions about your payments. It could lead to you paying off your loans more quickly and save you thousands of dollars. Sign up for automatic payments so you’ll be less likely to make late payments and have to pay late fees. Many lenders offer slight interest rate deductions for this.
Don’t overuse forbearance or deferment
Forbearance is easier to get and allows you to put off or reduce payments for three years or more. Deferment allows you to stop making payments for a certain period of time in specific situations. Examples of these situations can include, but are not limited to, returning to school, unemployment, or having a baby. However, you are still expected to pay interest on these methods, either during or after the period you are using them. The only time you won’t have to pay interest is if you use a deferment on a subsidized federal loan. Only use one of these options if you find yourself in a tight spot. Don’t use either for too long because interest does continue to accrue during the period you are using them.
Be careful about consolidating
This isn’t to say consolidating is absolutely a bad thing, because it can have its benefits. For instance, if you want income-based repayment options and your lender doesn’t offer them, you might want to take that loan somewhere else to get that option. You may also consolidate to remove a co-signer from a private loan or are juggling too many loans. That being said, keeping loans separate can have its benefits, as well. With separate loans, you can potentially accelerate your repayment by paying down several small loans rather than one large one.
Do you have any questions regarding these tips for tackling student loan debt? Let us know! To enlist the help of trustworthy, effective credit repair experts, call us today at 1-866-991-4885!
No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.
We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.