5 Student Loan Tips That Will Change Your Finances for the Better

Getting a degree is already difficult enough as it is. However, that school stress is amplified when you have to take into consideration that you are now responsible for tens of thousands of dollars in student debt. According to Zack Friedman, a finance officer, U.S. debt in 2019 is totaled to be $1.56 trillion dollars. All of that money is owed by roughly 44 million borrowers which means the average person owes roughly $34,899. That's a lot of money to handle especially when you're fresh out of college and looking to kick start your career. These tips will facilitate the process of paying off your student loan debt and allow you to get your life on track sooner.

Tip #1: Understand Your Loan

Before you can plan on how to tackle your loan you must first understand what the loan entails. Student loans can get confusing depending on how your debt is broken down, as well as the use of federal and private student loans. You need to understand how much you owe in total, any repayment penalties you need to be aware of, the length of you loan, etc. All of that will be highlighted for you whether you choose a federal student loan or a private student loan.

Tip #2: Get it Paid Off as Quick as Possible

As long as you don't have any early payment penalties then you should get your loan paid off sooner rather than later. If you have a loan repayment plan of 15 years, but you can manage to pay it down by 5 years then you should definitely take care of the loan. This means you don't have to continue to worry about any accrued interest fees as well as the strain of being in debt.

Tip #3: What to do if You're Lacking Funds

Don't panic! If you look at your loan agreement you may have eligibility to temporarily postpone payments with either deferments or forbearance. These are only options to look into if you're experiencing a significant financial hardship because interest rate can accrue on loans during these time periods. That means it will increase your overall final debt so be certain when looking into this alternative.

Tip #4: Resist the Urge to Just Say "Forget About It!"

Just how people feel the urge to not pay the IRS during tax season, many students feel like they can just skip out on their student loans. However, you should not do this because your loan will become delinquent and if your loan is delinquent for more than 90 days then a loan servicer will report this delinquency to the three major credit bureaus. When this happens, your score will drop and it can affect your ability to get loans, utilities, insurance, cell phones, etc. due to your credit not having a clean history. Now let's say you miss a payment by 270 days then your loan will end up in default. When your loan is in default, then all your funds become due immediately. If you can't pay (usually borrowers can't pay the entire total upfront hence why they got a student loan) then your loan can go to collections. Now this is where even more issues can arise, if your loan goes to collections then you may now be responsible for collection fees. If you chose a federal loan, the government can try to take you to court, they can garnish your wages, they can take your tax refund, and social security benefits can be taken as well. Not only do you have to worry about all of that, that is on top of your credit score that is now affected by not paying. If you have a cosigner then you have put them in a difficult situation because their credit can take a hit if they refuse to take responsibility for your loan.

Tip #5: Set a Strict Budget for Yourself

It is easy to say that you will pay the minimum monthly payment for the loan. However, if you are prone to living outside of your means and constantly going out, buying fast food, so on and so forth you may have to face the fact that you can't pay the monthly payment with how you're living. You need to sit down and create a strict and rigid budget plan to focus on paying off this loan. Saving a bit of money for yourself can be arranged as long as you stick to a limit. You may have to not go out as much, start cooking at home more, and however you can figure out ways to cut the amount you're spending and focus that on loans. It won't be fun but in the long run you can stop worrying about the debt stress and build your credit fast!

These tips are meant to help prep you to pay the loans off properly and ensure that you can do it in the most efficient way. If you keep at it and keep yourself consistent then you will not have any issues paying off student debt!