“Today, roughly 70% of American students end up taking out loans to go to college. The average graduate leaves school with around $30,000 in debt and all told, some 45 million Americans owe $1.6 trillion in student loans — and counting” (Samantha Fields). If you are a current or former college student, student loans are a familiar topic that may have affected your life. Owing money is not the end of the world but when it comes to student loans, the amount owed can sometimes hinder a person’s ability to be comfortable financially. Understanding what type of student loans you have and having a plan to pay them off are actions that will lead to the debt being paid off.
Types of Student Loans
Student loans can be federal (government) or private loans from companies like Sallie Mae, Discover bank, and College Ave Private Student Loans. There are two kinds of federal loans, subsidized and unsubsidized. Subsidized loans are student loans that do not make the student pay interest on the loan while in college while unsubsidized loans are student loans that do build interest while in school. If you want to find what loans you personally have, I recommend you look at www.studentaid.gov, your student portal on your college’s financial aid website, and for private loans you can pull up your credit report for free from www.annualcreditreport.com.
How to strategically pay off student debt
If you are looking at your total student loan debt and are anxious, don’t worry, eliminating this debt is possible. Take a deep breath and start to create a plan for yourself to work at this debt over time. After understanding your student loan debt, you should figure out where you would like to start payments first. You may want to pay off loans with the highest interest rate or the smallest loan amount, it all depends on your personal preference. You are able to pay student loans while in school, so you can use income from an internship, part time job, or potentially scholarship money to make payments. Another way to help the financial burden of college and eliminate some student loan debt would be becoming a Resident Assistant (RA). Most people know of the position but don’t really think about how their compensation (free room and board) can help college costs. I personally had a position similar to that at my school called an Intercultural Aide, which allowed me to receive free room and board, reducing my college costs by almost half for that school year.
Income Driven Repayment Plans & Refinancing
The last two topics that can possibly help you in your process of paying student loans is income driven repayment plans and refinancing loans. You are more likely to look at these options post graduation once you start to work full time and receive more income. You may be eligible for income driven repayment plans depending on the federal loan you have. These plans allow the borrower to make payments based on their after tax income. Refinancing loans can allow the borrower to get a lower interest rate on their loans. To refinance your student loans, the loan provider will probably be looking for a solid credit score, your employment, and a history of making loan payments without missing any payments. It is important to know that refinancing your loans can eliminate other benefits that you could possibly use on federal loans like deferment of payments and student loan forgiveness.
Ultimately, paying back student loans can be a daunting task but there will always be ways to make that task possible!
Disclaimer: Thegrownwave.com is a personal finance blog, not a professional investment advisor. The content produced from the blog is provided for free and only for informational purposes. Thegrownwave.com does not and cannot promise the accuracy and reliability of any content in comparison to your individual circumstances.
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