Strategies for Avoiding Huge Student Loan Debt
The statistics of the debt profile in America revealed that Americans are currently $1.54 trillion deep into student loan debt. This figure is not a small figure in any way. Can we say they education is becoming too expensive? But someone said, “If education is too expensive, try ignorance”. While it is good to be educated, carrying excessive debt can also be burdensome. May be, it is high time we started reconsidering the kind of education we encourage our people to have. Must we all go to University? I am beginning to reason with what Robert Kiyosaki said in his book entitled “Rich Dad, Poor Dad”. In his book, he explained that the era of going to school, get a good grade has passed. If education means carrying a load of debts for years, one may need to examine himself whether formal education is the right kind of education he needs to succeed in life.
I don’t want you to misunderstand me. I still believe that there is more to gain from going through colleges and universities. The point I am making here is that excessive debt is not good and it can be avoided. For people that intend to go to college or university, you need to be sure that you will be happy with yourself when you will be graduating. It should not be other way round. If the student loan debt you have accumulated is too high, you may not be that excited by the time you graduate. The thought of how much student loan debt you need to pay can be overwhelming. This situation is even more complicated as it is not automatic that you will get job immediately after you have graduated. If you are fortunate to get a job, it is another thing for you to get a good paying job that will help you pay off your student loan debt quickly. Due to all these uncertainties in the labor market, it is important that you limit your student loan debt to the barest minimum. In order to achieve this, you can adopt the following strategies:
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Apply for Scholarship: There are various scholarship programs all across United States of America waiting to be tapped by suitably qualified candidates. Unfortunately, some students are not aware of some of these scholarship programs. Their mindset is already fixed on student loans. I thereby challenge you to go online to search for available scholarship programs. Not all scholarships are open to everyone. Some may require that interested applicants should study a particular course or meet certain criteria. But one good thing about scholarships is that they are free. You will not need to repay the amount awarded to you. If the amount you are awarded is not enough to pay your fees all through, you will not need to borrow too much amount in order to complete your education. Meanwhile, while searching online, you need to be sure that you don’t fall victim of scammers. If anybody is asking you to make payment before you can be allowed to apply for a scholarship, it can be a scam. Also, you should not disclose your personal information on websites you don’t trust.
Apply for Subsidized Student Loans: Government has subsidized student loans and unsubsidized student loans. The main advantage of subsidized student loans over unsubsidized student loans is that government helps you pay interest on subsidized student loans during grace, deferment and forbearance periods. If you can avoid some interest payments, your student loan debt will not be too much for you by the time you graduate. However, the eligibility requirements for subsidized student loans are more stringent than that of unsubsidized student loans. If you qualify, you will need to fill the Free Application for Federal Student Aids (FAFSA). This form is free just as its name implies. If anyone is trying to sell you the form, you should know that the person is trying to exploit you.
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Start paying Interest Early: If your student loan is either private student loan or unsubsidized student loans, I will encourage you to start paying the interest while you are still in school. You should not allow the interest to accumulate. The reason why some students end up graduating with very high student loan debt is not because of the principal amount they borrowed. It is as a result of the interest which have compounded on the interest over time. So, if you receive gift, you can set it aside for the payment of the interest on your student loan.
Don’t make minimum payment: When you start making payment, your lender will allow you to make minimum payment. But this will not be to your advantage in the long run. If you make minimum payment, you are simply elongating the period it will take you to completely pay off the student loan debt. Chunk of the amount you pay will be used to pay the interest while small portion will go towards principal repayment. Also, the longer your student loan debt stays, the more interest you pay.
Refinance your student loans: If you have student loans with high interest rates, you can refinance them by obtaining new loan at a better interest rate while you pay off the old ones. Student loans refinancing will makes sense if your credit score has improved significantly. If your credit score is better than what it was when you first took your student loans, you will be able to negotiate for better interest rate. This can save you some bucks over a long period.
Enroll into Student Loan Forgiveness Program: There are several student loan forgiveness programs that government have for people with federal student loans. These include, public service loan forgiveness, forgiveness from an income driven plan, Federal Perkins loan cancellation, teacher loan forgiveness, loan forgiveness for nurses, loan repayment loan assistance for doctors and other healthcare professional, military student loan forgiveness and assistance, loan repayment loan assistance for lawyers and student loan discharge for special circumstances. So, you should not hesitate to take advantage of any of these if you qualify.
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From the above tips, you must have noticed that some of them are proactive while others may be reactive. No matter the stage you are, whether you are still at school or you have already graduated, you can still do something to reduce your student loan debt burden. However, it is always better to plan ahead.