Student loan debt – this is the nation’s biggest financial concern nowadays. After the debt ceiling controversy, the rapidly rising student loan debt has created a storm in the financial world. Some of the financial experts are claiming that student loan debt will be the next ‘time bomb’ of the country.
Thousands of undergraduates, graduates, parents and even seniors are neck deep in loan debt. They are desperately searching for the ways to escape this time bomb without getting any injury. If you’re one of those people, then read along to know about the 3 ways to avoid the student loan debt menace successfully.
Ways to fight with the student loan debt
Check out the 3 ways to tackle student loan debt.
1. Slash your expenses in other areas: Students need to understand that no one will give them free money to pay off debt. They’ll have to arrange the money themselves. So, if the students are thinking that they’ll borrow money from the credit cards to pay off the debt, then they’re doing a bigger mistake. They’ll end up getting sued if the credit card bills are not paid within time.
The bottom line is to generate money. The students can do this by increasing their income or decreasing their expenses. If it is too difficult to earn extra bucks in this tough economy, then the students will have to curb expenses on food, clothes, conveyance, recreation, etc.
The loans can’t be eliminated through bankruptcy. As such the students will have to manage these loans carefully. They need to create a budget to generate cash from overlooked areas. In addition, they need to educate themselves about the drawbacks of using high interest credit cards excessively.
2. Get protection of the federal loans: Most of the people don’t like federal student loans as they can’t be discharged through bankruptcy. However, very few people are aware of the protections offered by the federal student loans. For example: deferment, forbearance, income based repayment plan, etc. These protections are not offered by the private student loan lenders.
The interest rates on the federal student loans are low. The interest rate on the Stafford Loan for the financial year of 2011-2012 is 3.4%. This rate is primarily for the subsidized loans. The rate on the unsubsidized loan is 6.8%. If any person faces problem in making payments on the loan, then he can opt for forbearance or other options.
3. Check and compare the options: There is one big drawback of the federal student loans. The students can only borrow a specific amount every year. For instance: the students can receive $5500 in their first year of college. In the second year, they can get up to $6500.However, in the third year, the maximum borrowing limit is $7500.
The problem is that this amount is not enough to meet the educational expenses. The school and tuition fees are very high. An average student has to spend nearly $8244 (barring the boarding fees) in the first year of college.
Students should not only focus on the federal loans because of the easy repayment options. They need to look at other available options as well. The best option will be to knock at the doors of the private lenders as well. Students need to make the final decisions after comparing the loan amount, flexibility of the repayment plan, interest rates, loan term, etc.
The best way to fight with the student loan debt is to get a job after completing graduation. Students can attend the various job fairs and career counseling seminars to know about the tricks to get a good job. Other than that, they can do summer jobs, part-time jobs, internships, to increase their work experience during their college days. This will help them to get a job easily.
Ryan Smith is an admired author of debtconsolidationcare community. He has made a notable contribution through his articles, by providing useful information for students to arrange free money to pay off debt. Some of his articles include Ways to pay off debt, sued for credit card debts, Debt consolidation Los Angeles and Credit card debt elimination program etc.