words Al Woods
For a lot of Americans looking to get a tertiary education, a college loan isn’t an option – it’s the only way. However, there’s only so much young adults can know about the financial intricacies of the loan system. It’s only until much later, typically after college, that the reality of being in debt confronts us.
With an average of $30,000 debt per person, the debt can seem daunting at first. However, if you consider your plan well enough, you can pay up in just a few years. Here are a couple of hacks you’ll find useful:
1. Understand your loans
Knowing the terms and conditions of your loans is imperative to your payment plan. For instance, if you have multiple loans, you may have to consolidate them into one to help you better manage them.
Seeing as most people don’t pay much attention to their loans until much later, keeping track of them can be a problem. You can request a free credit report to know who your lenders are, then follow up with calls about your loan terms.
Several organizations offer loan refinancing, and with a click or two, you can get an offer that eases payment for you.
2. Pay off your interest first
Most loan repayments don’t kick off until you’re done with college. Some even offer a 6-month grace period after school, in case you need time to get a job. It would be best if you used this time to pay off as much of the interest as you can. Interest on student loans is always compounded, so the less you owe, the less you pay.
You may also be able to apply for deferment periods for when you’re unemployed, experiencing economic hardship, or in military service. Take advantage of these deferment periods to pay up the interest on your loans.
During tax season, you can also deduct your student loan payment from your taxable income by up to $2,500. It may not be much, but when paying back your student loan, you need every penny.
3. Live frugally
Since the interest on student loans are compounded, your first few years out of college will be the most important to your payment plan. While it’s normal to feel you now deserve a good life after finishing college, you should avoid it.
College, for most people, is one long lesson in living frugally. If you’re fresh out of college, you’re still used to the life, so why stop now? By minimizing your spending and increasing your initial deposits, you can significantly reduce how much you’ll have to pay in the future.
College debt is a burden for a lot of young people just starting adult life. However, if you take a long-term view, it may not be so bad. Your earning power is likely to go up as you age and become a specialist in your field. While it may seem insurmountable now, in a few years, you’ll definitely feel differently.