Most college students who take out student loans because they couldn’t pay for college without loans assume that a job is waiting for them after graduation, so the student loans will be repaid in a timely manner.
As the economy continues to struggle, graduates are finding a very different reality after they walk across the stage and receive that coveted diploma.
Jobs of any sort are not as readily available as they had planned.
Even if that job does materialize, the salary may be lower than anticipated which will make student loan payments more difficult to make each month.
Whatever the situation, the graduate has many options for repaying the loan while enjoying the new ventures life affords.
First, they must learn to save money. For instance, saving by comparing car insurance and finding the best college car insurance rates could really help one save money in important payments.
Second, read the following steps and find out some other ways to save and pay off your student loans faster:
Struggling students far outnumber the trust fund babies that graduate with money in the bank and no debt. Creative and frugal lifestyles are prominent across almost every college campus, and students who have lived frugally for four years can continue those same habits in the early months of career life.
Restraining monthly expenditures until the loans are repaid will ensure that money is available every month to pay much more than the required amount. Simple choices in the earliest months of the job can enable the graduate to repay the loan quickly and then embrace some financial freedom without the debt burden.
Every loan is different, but after graduation there is usually a grace period where interest is not being added to the loan. Many private loans offer six months interest-free and this keeps the debt from increasing. If the graduate can pay off the entire loan in this period, the progress toward full repayment will be much quicker. Not having to pay any interest on the loan is the best option if at all possible.
If the loan cannot be paid prior to the accrual of interest, another option is to have the loans refinanced by another bank at a lower rate. This option must be researched very carefully to evaluate every possible deal and avoid issues in future years of the loan.
Many student loans offer repayment options that will not be offered on a refinance loan through a bank. A large number of financial institutions will contact the graduate with “deals” for consolidating student loans, but the graduate must be informed and careful about these decisions.
The Office of Personnel Management offers some options for graduates who are working for government agencies. A portion of the loan can be paid off by the government – up to $10,000 per year. Some people will ask their private employer for this perk to assist with repaying loans.
Care must be exercised with this request since not every employer would be open to the idea. Exceptional job performance would be required for the private employer to embrace an employee’s student debt. There are tax implications to these arrangements and the graduate must understand the impacts of receiving additional income.
Extended unemployment after graduation is just one of many reasons that a legitimate hardship status would be awarded to a student. The clock will start to tick on the student debt when the college degree is completed, and the student is no longer in school.
If a job is not found, and the loan payments become due, the graduate must take the first step and contact the Department of Education to fill out a Statement of Financial Status Form.
Lengthy medical illness is another hardship that is recognized by the Department of Education. There have been instances where the DEA will cancel a federal student loan because of an extended illness because they know the financial resources are not present for both obligations.
Financial irresponsibility is not a legitimate claim for hardship status and attempting to default on student loans can have a profound effect on the credit rating for many years. If employers check the credit history and see the default on the student debt commitment, they can elect to not hire the job candidate. Other financial impacts include the inability to qualify for bank loans that would allow cars and homes to be purchased using credit.
In certain circumstances where the student loan terms are not fair and appropriate, the graduate can contact a National Ombudsman to act as an advocate in a dispute, which is the Federal Student Aid Office of the Ombudsman. If a dispute with the student loan lender arises, the ombudsman can act as a mediator.
Late payments and any questionable practices on the part of the graduate will negate the efforts of the ombudsman to act on behalf of the graduate. Every effort must be made to keep the loan current while the dispute is being addressed. If the loan cannot be repaid, the hardship status is a better approach than the ombudsman’s office.
Students are depending on loans to pay for school at a higher rate than ever before. The cost of higher education is out of financial reach for many people who wish to complete their education with an advanced degree in a field that will be their life’s work for a very long time.
Deferring the cost of school might seem like an excellent option until graduation comes and repayment of the debt can no longer be postponed. Starting professional life with a large debt burden can be difficult and discouraging, but the loans can be paid off with diligence and discipline.
Follow these five recommendations to take control of the debt situation and devise a repayment plan before the interest accumulates and makes the debt more expensive.
Photo by Will Hale
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