Help! My Student Loans Are Overwhelming Me
Use These Easy Strategies to Handle Overwhelming Student Loan Debt
Getting ready to graduate college? Then you may just now be facing the reality of the amount you borrowed to attend school. If you took out private student loans in addition to the federal student loans you may be in an even more difficult situation.
While student loan debt can be daunting, it's important to be as proactive as possible and figure out a repayment plan that works for you.
There are several options available to you when it comes to paying back your federal student loans.
The federal government offers income-based repayment options that allow you to reduce your monthly payment based on your current income. It will adjust as your income adjusts and after making on-time payments for twenty-five years you can have the remaining balance of your loan forgiven. The Pay As You Earn (PAYE) program is a similar option.
Another option is to consolidate your federal loans, which will consolidate your loans into a single monthly payment with one interest rate. This option may decrease your monthly payment, but you will end up paying more in interest over the life of your loan. In addition, if you have two loans with different interest rates, you will end up paying the higher interest rate.
Consolidating your loans or opting for an-income based payment will likely make it easier to manage your financial situation and get a handle on your student loans.
If you encounter financial hardship such as job loss, you can defer your federal student loans. But keep in mind that you will need to document your situation and turn in proof of your situation. You cannot simply stop making payments.
Private Student Loans
Private student loans have a higher interest rate and will not offer some of the flexible repayment options of federal loans. Additionally, the interest rates are normally much higher on private loans.
That's why if you have private loans, you need to make paying them off a priority. If the payment amount is too much, you may also consider consolidating and refinance your private loans. When you consolidate your private student loan try to lock in an interest rate instead of using a variable interest rate. The shorter the term of the loan the less you will pay in interest, so try to make the payment amount manageable, but pay as much as you can.
If you still feel overwhelmed by your student loan payments, try talking to your school's financial aid office. Many financial aid offices offer exit counseling to help you come up with a plan to pay off your student loans. An outside financial counselor can also help you create a budget to pay off your student loans more quickly.
If you have amassed a large amount of student loan debt you may need to continue to live a student lifestyle until you have reduced the amount you currently owe. The amount you make once you graduate will determine just how much you have to cut back on your current lifestyle.
Updated by Rachel Morgan Cautero.