Graduation Debt: How to Manage Student Loans and Live Your Life

Graduates have a lot of things to be happy about. Having a college education and a degree is the best way to make sure a bright professional future and a successful career. Student loan debt however, do not end upon graduation. It could take years, even decades, to payoff your student loan debt.

In order to get a head start in life and to get rid of student loan debt, management of personal finances is the key. Here are some tips:

  • Borrow only what you need for school. You might be eligible for more than what you’ll need to cover the cost of your education but remember, you’ll still need to pay for what you’re borrowing so be very pragmatic with the amount you’ll be taking out. Always consider your potential income on your first year out of school and include your loan payments in your monthly expenses.
  • Only consider private loans as a last resort. There are plenty of financial aids available for students and these are easier to payoff than personal loans. Financial help is also more accessible to students through grants and scholarships so unless it is necessary, stay away from private loans.
  • Be familiar with the fine print. Review repeatedly what your loan entails and your responsibilities to your lender. The terms and conditions are legally binding and you will need to pay them back. Before agreeing to take out an educational loan, you may want review your current circumstances to decide whether the conditions are doable on your end. Before signing anything, be 100% sure that you can get rid of your debt by the specified time frame.
  • Make timely payments. Or even better, make early payments. If you are a student trying to get rid of your debt, it’s best to start paying as soon as you can. Early payments could also give you a higher chance of having bigger personal savings in the future because you’ll be ending loan payments earlier. Get as much information as you can from your loan provider on the best payment options available for you.

To effectively payoff student loan debt,staying on top of your financial situation is essential. Always look 2-3 years ahead and consider your income and other financial resources that can factor in your monthly loan payments. It’s not impossible to eliminate student loan debt as long as you have the knowledge and discipline. Remember to stay focused this is something that can consume a large part of your life.

Cap, Gown, and Debt: Helping You Manage Student Loans

According to a recent report issued by Edvisors.com, students that are part of the graduating class of 2015 will be saddled with an average of $35,000 in student loan debt. While $2,000 higher than the average debt last year, these numbers no longer shock a nation used to seeing the total student loan debt in the U.S. surpassing $1.3 trillion.

Not only is this amount of debt bad news for graduates that will likely only find entry-level jobs, but it’s also causing many high school students to second-guess if college is really worth the financial struggle at all? For those that have already graduated, the burden of debt is real and a huge strain.

Debt can get in the way of moving forward with the things in life that many people dream of, like; buying a home, saving for retirement, sending their own children to college and much more. Debt can even prevent a person from marrying, and even choosing to have children – often, these things are pushed to “off” to a later time in life when debt isn’t so high… but how do you work to eliminate that debt for a “later time?”

The other downside to a large amount of student loan debt is the sheer emotional distress that comes with paying more money than you can earn each month, or dealing with debt collectors that are less than understanding to put it mildly. Is there any end to the burden that college and student loan debt places on new graduates?

Between a Rock & a Hard Place… Together!

If you are facing student loan debt, you are not alone. In the U.S. 40 million Americans have some kind of student loan debt. This type of debt is higher than credit card debt and car loan debt combined – second only to mortgage debt. With fairly new laws that make student loans exempt from bankruptcy it can seem like there’s no way out. This debt can, in fact, be suffocating.

The good news is… there are ways to deal with student loan debt, no matter how much you owe, or how long you’ve owed that amount. The best way to figure out a strategy that will get you out of student loan debt is to speak with a qualified lawyer that works with students struggling to pay off debt. It can be impossible to negotiate with student loan companies (both private and federal) on your own, since these companies often have the upper hand. But help is available and getting out of debt is possible!!

Facing Collections?

It’s easy to default on a student loan. If you miss one payment, or simply forget to pay, your loan will go into default. Once that happens, the loan can be passed from collection agency to collection agency resulting in endless phone calls. Some agencies will even go so far as to contact family members with the excuse that they are trying to reach you – largely a psychological game. You should know, though, that you still have rights, even when it comes to a defaulted loan.

Some of the things that you should know about collection agencies attempting to collect a student loan debt include:

  • It is illegal for a company to leave details about your loan on a public answering machine.
  • A company cannot discuss your loans with anyone that is not a co-signer.
  • Companies cannot garnish your wages without a court order.
  • In most states, there is a statute of limitation on the life of a loan.

Remember, collection agencies must still follow the Federal Fair Debt Collection Practices Act ( FDCPA ). Each state is different, and each loan is unique, but help is available.

Tips for Managing Student Loan Debt

1. Maintain the “Broke” Student Mentality

The majority of people are unable to obtain great wealth because they are unable to control needless spending. This can be especially difficult for students who are just entering the job market, and are probably earning more money than they ever have before. However, when it comes to living frugally students have a major advantage over seasoned adults who are used to living an expensive lifestyle: most students are not used to doing so. Most students already live a frugal lifestyle, and that means it will be easier for them to maintain this lifestyle after they get out of school. Remember, $20 here and $10 there adds up over the course of a year. If you can control the “little” impulse purchases you will be in good shape.

2. Develop a Cash Flow Statement and a Budget and Stick to Them

The use of some type of cash flow statement can be a major advantage to young people. Some system of keeping up with your cash flows allows you to see exactly where every dollar comes from and where it goes. When a cash flow statement is used in conjunction with a budget you then have the entire financial picture. You are able to see how much you thought you would spend on a certain thing, as well as what you actually spent. These two sources of financial information are probably the most important tools young people have at their disposal. You can track your expenses online for free at sites such as mint.com and yodlee.com.

3. Monitor Your Credit Report

Your credit will affect many aspects of your adult life such as whether you can get a car loan, a mortgage, and even some jobs. That is why it is very important to keep an eye on your credit score and your credit report. Make sure that you are paying your bills on time, and make sure you are not approaching the upper bounds of your credit limits. You should utilize sites that offer free tips on how to improvement your credit score on a regular basis.

4. Learn About Your Student Loans and Your Repayment Options

There are three main repayment plans for most student loans: graduated, extended, and income-based repayment. Each of these plans offers different features that will cater to different needs. If you believe your salary is going to increase rapidly then a graduated plan may be best for you. If you are not able to make the recommended payments, an extended or income-based plan may be best. Learn about the different options available to you, and choose the one that puts you in the best financial position going forward.

5. Think About Lowering Your Interest Rate with Student Loan Consolidation Programs

There is a new consolidation program available to students that will last until the end of June. It allows you to lower your interest rate by 0.25% for consolidating, as well as another 0.25% if you choose to make automatic payments each month. This is a great way to lower your total costs even if it is only 0.25% – 0.50%. Every little bit helps, especially with larger loan balances.

6. ALWAYS Pay Off Your Higher Interest Loans First

Today, most student loans have low interest rates thanks to tax payer subsidies. Students who are graduating with other debt on top of student loan debt should always compare interest rates and pay off the debt with the highest rate of interest FIRST. It makes less than no sense to pay off a loan with a 4% interest rate while a line of credit sits and accumulates interest at 19% a year. Pay attention to interest rates, and you will save yourself a lot of money.

7. Defer Payments if Necessary. Do Not Default.

If you are in a position where you are having trouble making payments on a line of credit or your student loans call the lender and ask about deferment or forbearance. In times such as these, lenders with be willing to work with you as long as you have continually made the effort to pay your bills. Default should be the final option only when there is no other. Default not only hurts your official credit, it also hurts your social credit. People will be much less likely to do business with you or help you out in a pinch if they know that in the past you simply walked away from your obligations. This is a situation to be avoided at all costs.

If you follow these tips you will be well on your way to a sound financial future.