There is little argument that going to college is expensive. To make it from beginning to end, it can take thousands of dollars every semester intuition costs alone. While there are various forms of financial aid, scholarships and often help from the parents, college has become so expensive that students have little choice but to use student loans to help with the costs.
Student loans are fairly easy to get and can help a person pay for their college education. However, this also leaves the student deep in debt when they graduate. In 2014, it was estimated that students graduating college were already overloaded with an average of $33,000 in debt. This number is startling, especially due to the current job market and the struggles that college students have gone through in order to find employment upon graduation.
These loans can be detrimental to the future of the students. Not only will they find themselves struggling to pay back the loans, but it may also affect their goals of obtaining their own house or car as well. Plus, these loans can take a decade or more to pay off, making it difficult for the student to begin their life. For this reason, many students search for a way to gain some relief from these student loans so that they can move on with their lives happily. Below are some tips to do just that.
Switch to a Different Payment Plan
With a traditional federal student loan, payment plans are set up to last 10 years. By choosing this repayment plan, you will have the benefit of saving money in the long run because of the lower interest that you will be paying over the life of the loan. However, this could also mean that your payment is higher than what you can afford.
If you find that you are struggling to make your loan payments, you may want to think about switching to a different payment plan. For example, it is usually set up that you will begin paying a small amount when you first graduate from college. Then as the years progress, you will continue to pay more every year.
However, extended repayment is also available, which can last up to 25 years. There are also income based options, such as Pay as you Earn that cap the amount you pay at 10% to 15% of the amount of your monthly income. Plus after 20 to 25 years, the remaining amount may be forgiven.
Keep in mind that there are also some professions, considered ‘helping professions’, like teachers and doctors that are actually able to have their student loans forgiven after 10 years. Your lender may also have some programs that you qualify for as well that you should check into.
If you find that you do not qualify for any of the options listed above or that your lender doesn’t provide income based repayment option, you may want to consider consolidating through the Department of Education. Even though this will not typically lower your payment, you will find that this option will make your loans easier to keep track of.
Also, by consolidating through studentloans.gov, you will then qualify for any of the options listed above as well. This is also something that your lender may offer you consolidation options as well, but often they do not. Many people then turn to consolidation companies, which turn out to be fairly expensive for a service that you can do on your own through the Department of Education.
Consolidate private loans after working on your credit
If you chose private student loans rather than federal options, you will need an entirely different strategy in order to find relief from them. While there are a handful of lenders who will allow you to consolidate your private student loans, they also take a look at your credit in order to qualify you.
Since students typically don’t have the best credit scores, it may be difficult to qualify. Also, it is suggested to avoid consolidating immediately after graduation and to wait a few years instead. This will give you time to build up your credit, which you can do in a number of ways.
First, it is important to obtain a copy of your credit report so that you can learn what your lender will be looking at. Start working on paying off the loans that are on your credit report. More than likely you probably will only have your student loans on your report, so just make sure that you maintain a regular monthly payment and do not fall behind because this can damage your credit.
Start by building your credit with a gas card. This is a credit card that you will use to only purchase gas and will pay off every month. You can also save up a bit of money in a savings account, around $2000, and apply for a loan using it as security. These are both simple ways to build up your credit and are items that most people will be able to qualify for easily.
After a few years, you can then visit with your lender to learn more about your consolidation options. While it can take some time to get to this point, you will find that your hard work pays off and that you are able to finally get some relief from your student loans.
Student loans are very helpful when a student is looking to pay for their college education. However, when it comes time to repay them, students may find that they have a difficult time to do so.
If you are in this situation, make sure that you rely on the tips listed above so that you can keep your credit intact and continue to build up your finances for the future. The most important thing that you can do is to maintain payments on your student loans so that you are not haunted by the credit implications in the future.