Education is very expensive and even more when you target schooling at the best institutions. It is at this point that education loans have become very helpful in enabling you to advance and reach career objectives.
However, the moment you are through with your education, you must get the right method of repaying the education loan. This has become burdensome to many. Here are the five ways to tackle the student loan burdens.
i) Check the federal loan repayment options
The federal loan options are designed to enable every student to complete their loan repayment. The plans are lenient and will assist you to pay the entire loan with minimal stress. For example, the standard repayment plan requires you to submit $50 every month for about 10 years.
Other options include the extended plan that requires you to pay $50 for 12-30 years. If your returns are very low, you could go for the income-contingent plan that allows you to make as low as $5 every month.
When you take any of these options, all you need to do is maintaining consistency over time to avoid negative impacts on your credit rating and access to finances.
ii) Make savings and direct them to the repayment of your loans
When you get out of college and are on your own, you will be required to make personal budgets to establish what to buy or not. You can increase your savings by cutting unnecessary things to direct the money towards loan repayment.
For example, you can do with a standard vehicle that has greater fuel economy instead of going for a larger one. You could even use public transport to make more savings. This will allow you to keep the burden on a downward trending outlook.
iii) Pay As You Earn
The greatest mistake that students make is thinking that they will get jobs and clear the loans at once. What this culminates in the accumulation of interest and bad credit rating. This is the wrong approach. The best way is to pay as you earn.
Make sure to identify the best federal student loan repayment method and then consistently clear it over time. You could also work out your own repayment model depending on the level of income. If you have a higher level of income, it is advisable to adopt a higher repayment monthly amount because it helps you clear the entire amount faster and with lower interest levels.
iv) Avoid taking too many additional loans
Many loans can turn out to be tricky especially if your income is low. It is advisable that you carefully evaluate the nature of your income and preferably complete the ones you have before taking the next. This will reduce the chances of defaulting.
Instead of rushing to borrowing, you may consider saving to buy what you intended to acquire using a loan. Savings for several years in carefully selected bank accounts will even earn you some interest.
v) Seek funds elsewhere to complete the loan
After you have adopted a specific plan to address your loan, you will still have the burden for so many years. It is advisable to make investments and use the profits to clear the loan.
For example, if you invest in capital markets and make several thousands of dollars in a few years, consider using them to clear the loan. Do not default on the student loan, select the right repayment loan options.
Tell us about your story, how did you get rid of your student loan?