Managing College Debt Tips
- Organize All Loans
- Prioritize Financial Obligations
- Always Stay In Touch With Lenders
- Look For Debt Reduction Options
- Set Extra Payment Goals
According to the U.S. Department of Education, colleges are facing stricter accountability standards for using employment placement assistance and programs. This is in an effort to reduce the amount of students who default on student loans. Although this should provide a great deal of reassurance to prospective and current college students, there are several other steps they can take to help manage their college debt.
1. Organize All Loans
Some students change schools or take time off from studying. This results in multiple loan accounts. Part of being smart about managing multiple debts is organizing them. The government’s National Student Loan Data System keeps current information about all loans. Simply log in there to create, verify or update a list of all active loans. Include the loan ID number, the lender’s name, the payment due date and the payment amount. Do this immediately after graduation before the grace period ends.
2. Prioritize Financial Obligations
To afford student loan payments, all unnecessary expenses should be cut. Items such as rent and utilities cannot be eliminated. However, using energy conservation tips can help to noticeably reduce utility bills. In addition to downgrading and cutting some services, consider using a debt consolidation loan for credit cards and other accounts that are getting out of control. For a more affordable student loan payment, discuss options with the lender. Also, take advantage of free mobile apps for finance management and expense tracking.
3. Always Stay In Touch With Lenders
Graduates should always keep their lenders informed. Too many recent graduates make the mistake of trying to avoid the lender or ignoring their financial responsibility because of an inability to pay. Lenders are willing to work with students to lower payments, and there are several other programs available for assistance. Many recent graduates do not find the right job for up to a year after graduation. Lenders can offer a temporary forbearance and other options in such situations. There is usually a workable solution. The key idea to remember is to always communicate to avoid defaulting.
4. Look For Debt Reduction Options
For students who have large debts after switching majors or finishing a bachelor’s degree, it is common to have a large loan balance. This balance can be lowered or eliminated through loan forgiveness programs. However, only students who meet certain criteria qualify. Some programs are only available after graduates make payments for 10 years, and some programs are available to students who become teachers. Another way to put some extra money toward student loan debts is to take advantage of the annual income tax deduction for student loan interest. Taxpayers can deduct up to $2,500 and can use any resulting refund to pay toward a student loan.
5. Set Extra Payment Goals
One good way to lower the balance on student loans is to set smaller quarterly goals or larger semi-annual goals for making extra payments. Paying off an extra $1,000 annually will help considerably. There are several ways to save money for this. In addition to cutting expenses, consider selling some unused belongings or picking up extra work. Some graduates can put their new skills to use by doing freelance work for extra cash.
Take advantage of any opportunity to learn better financial management skills. Many colleges offer free seminars or short classes on money and debt management. This is a good idea for graduates, current students and future students. After selecting a degree program, be sure to discuss scholarship, grant and loan options with a financial aid adviser.