Students of higher education use a variety of resources to help cover their tuition and other school expenses. Gifted academics and athletes, for example, earn coveted college cash through scholarships recognizing them for outstanding achievement in the classroom and on the field. And those who qualify, use grants from the Federal Government and other agencies to offset school costs. Both of these forms of student aid involve funds that don’t require repayment, so they shave college expenses directly, lowering the overall cost of higher education for qualified participants.
Beyond the “free money” provided by grants and scholarships, college students turn to education loans offered exclusively for tuition, books, and related expenses. In the United States, the best student loan terms are found on government-backed financial aid issued by the William D. Ford Federal Direct Loan Program. Under this widely utilized program, students enjoy favorable interest rates around 3.0% and repayment plans designed to accommodate a variety of situations.
Though there is a great deal of flexibility built-in to the program, loans are loans, which must ultimately be repaid – with interest. And though loans backed by the Department of Education are the most forgiving, some students also turn to private student loans to bridge the higher education affordability gap. Private loans from banks and credit unions carry higher interest rates than subsidized government loans, so they are often used to supplement federal loans when there is additional financial need. In either case, borrowers are bound to payment agreements, which govern the terms and duration of repayment. The following approaches help students protect their credit as they move out of student loan debt.
Avoid Additional Debt
Most student loans come due after graduation, so it is important to anticipate when your payments start and budget appropriately for monthly repayment obligations. To keep expenses manageable following graduation, avoid making major purchases that might stretch you thin meeting student loan payment obligations. Even if you’ve found employment, hold-off on buying a new car or making other capital purchases. If you need to make a major purchase, reevaluate your budget once you’ve established a track record of loan repayment success, to make sure your bases are covered.
Student Loan Consolidation
While pursuing higher education, many students accumulate multiple student loans, issued at various times during college. As a result, recent graduates find themselves with more than one repayment date each month, with unique terms and conditions attached to each loan. In many cases, student loan consolidation leads to better repayment terms for borrowers. Under such programs, multiple loans are brought under a single repayment umbrella, which frequently results in lower interest rates and a single monthly payment. Consolidation programs are especially helpful for students who seek lower payments. Though consolidation may extend the total number of payments, reducing monthly obligations helps borrowers keep pace with repayment.
Lower Living Expenses
Entry-level employment doesn’t always provide income sufficient to cover student loan payments following graduation. To move out of debt, underpaid graduates find ways to reduce their living expenses, aligning them with their personal ability to pay. Sharing accommodations with roommates, for example, reduces the cost of living during the lean years of early employment, enabling student borrowers to manage debt and reduce principal. And alternative transportation, like bus, bike or carpool also economizes living expenses, leading to accelerated student loan repayment.
For those students earing degrees in certain fields, loan forgiveness provides a valuable opportunity for funding student loans. Under such programs, graduates commit to service agreements in exchange for loan forgiveness. Some teachers, for example, qualify for loan forgiveness up to $17,500, through the federally backed program designed to lure students into the profession. In exchange for five years’ worth of service at designated schools servicing low-income districts, graduates are off the hook for outstanding student debt.
Knowing your options is the key to moving out of student loan debt. Policies change, so it is important to stay atop developments, ensuring you are on the best path to repayment. Forbearance and deferment options, for example, provide breathing room when repayment resources are limited, as well as income-based repayment options tied directly to your take home pay.
These and other flexible structures help student borrowers avoid repayment default, which leads to additional credit difficulties for borrowers in arrears. By consolidating loans and managing living expenses, most borrowers lock-in to reasonable student loan repayment plans they can cover. When difficulties arise, a proactive approach with lenders brings about solutions appropriate for each case, enabling borrowers to eventually move out of student debt.
Daphne Holmes, Guest Contributor
She is a writer from arrestrecords.com.
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My teaching program placed me in a classroom that was violating discrimination laws. When I brought this up I was forced out of the program. Will I be able to have my student loans forgiven?