Guide to Student Loan Debt
What is student loan debt?
Student loans have become a necessity with the rising costs of higher education. When in college, it is common practice for students to borrow low interest loans from the government and private loans from banks and loan companies in order to cover the large expense of college such as room and board, food, tuition, and course fees. Companies such as SallieMae and Citibank offer private loans to student with higher interest rates than the government loans. For the Stafford subsidized loan, no interest is accrued while the student is in school but it begins to gain interest as soon as the student graduates and is launched into the real world. Naturally, students are unable to pay the whole loan off immediately; this is why recent graduates find themselves struggling to pay large monthly student loan payments in addition to their bills and living expenses.
How can I avoid too much student debt?
Unfortunately, in most occasions, student loans are necessary to pay for college. The best way to avoid too much student debt is to take out as few loans as possible of course. Also, apply for as many scholarships as possible. Even after you’re already attending college, you can still be eligible for scholarships. It’s worth the time to search for scholarships and apply to as many as you can. Often, it’s just a matter of filling out the application and writing a short essay.
Another tactic is to get a part time job during school and pay the interest (and principal if you can) while in school. It is important to not simply forget about your payments, because missing or late payments can increase interest rates and rack up penalty fees, not to mention hurt your credit score. It is important to take care of loans as quickly as possible.
Who are the reputable debt negotiation services?
It is important to understand the difference between a legitimate student loan company and a scam. TASC monitors companies that issue loans and reports on the legitimacy of each. When taking a non-federal loan, it is always a good idea to look the company up on TASC’s database to make sure the company is reputable. Also be sure to look into the new payment option known as IBR (Income-based repayment) this July 2009. This program allows student debt holders to pay back what they can based on their income level. This payment method only requires 10 percent of annual income.
How can I do it myself?
It is always a good idea to try and negotiate the debt yourself in order to minimize the fees and such implemented by debt consolidation companies. Though in some cases, these companies are necessary, it is always a good idea to try and minimize debt from loan companies as soon as possible. The best thing to do first is to explain the situation to the loan-issuing company. Most of the time, a loan issuing company is good about listening to clients’ situations and planning their loan collection accordingly. Once the situation is explained, work with a debt consolidator from the company to plan out a course of action or a payment plan with the least amount of interest possible.
For more information
IBRinfo.org - Resource on income-based repayment plans
Projectstudentdebt.org - Top 10 Student Loan Tips for Recent Graduates
Salliemae.com - Large student loan lender
Fastweb.com - Popular search tool for scholarships and grants