How To Tackle Your Student Loans

Different ways to tackle students loans when the grace period ends

The one thing that students with college loans are trending is the graduation date when the grace period ends. The moment a student graduates, the student will be in a whole lot of debt and the interest rates will begin. This large amount of debt can only take students many years to pay off.

However there are a few strategies that students can implement to tackle this large debt.

The first step begins with the different types of loans that a student can borrow from.

Government backed students loans are a subsidized hybrid loan. The student borrows from a lender and in return the government backs the lender. This type of loan was officially not offered as of 2010.

Another type of loan is Federal direct student loans. These loans are backed by the U.S. department of education. These loans are subsidized by the government and most of the time has the lowest interest rates and most flexible payback schedule. While the student goes to college, the government pays for the interest rate until the grace period is over. However some students cannot receive the full amount receive a smaller loan amount. Due to the flexible payment schedule and interest rates as low as 3-4%, students should try and maximum this type of loan. Compared to private loans which have interest rates of 9-12%, federal direct loans will take less time to pay back.

The other type of loan is private loans. Private loans have no government involvement and tend to have the highest interest rates. Many private loans have floating interest rates that could rise over the years. Some private loans do offer fixed interest rates. When you apply for these types of loans, you should always negotiate for a better deal. Lowering the interest rate by 1-2 percent can have a huge impact and save you thousands every year.

Look for low fixed interest rates

Shopping around and searching for lower interest rates can be well worth your time. Almost all lenders offer some sort of fixed interest rates. By locking in lower interest rates, you do not have to worry about rising interest rates. This can be a huge safety net but can also be dangerous. If you are not able to acquire the lowest interest rates, you might want to accept a floating interest rate. Accepting a higher fixed interest rate will cause you huge problems in the future.

Other tricks

Some government programs offer debt forgiveness or a reduction in debt. Military programs offer ROTC programs that pay for the college tuition, books, and food and living expenses for students. The requirement asks students to join the military for 4 years after graduation and participate in ROTC classes throughout college.

Accept a job at a non-for profit or government field. These jobs sometimes offer debt forgiveness programs. The debt forgiveness program will pay for your student tuition debt if you stay with them for a minimum for 10 years. The Public Loan Service Forgiveness program has helped thousands of students already. These jobs also pay a competitive salary as well.

Don’t pay the minimum monthly payments. Paying the minimum monthly payments will extend the time in which you are paying interest rates. You want to pay as much as you can every month and not the minimum. This will lower the total time of the loan.

Ask your lender for a period of forbearance if you are not able to catch up with the monthly payments. The period of forbearance will allow you to hold off on your loan for a short period. This will allow you to get back on your feet and perhaps get a better paying job.

Bankruptcy?

This is probably the most serious and detrimental option for a graduating students. Going into default would mean the entire loan amount is due. If you are not able to pay back the entire loan amount, payments will be automatically taken out of any future salaries. This will also hurt your credit score the most. Students who just graduate college are trying to build their credit score. A default will negatively affect your credit score for up to 10 years.

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