Strategies to wipe out student loan debts

Student loan debt ranks second amongst household debt expenses in the USA. As per the statistics, borrowers owe $1.3 billion on student loans, a figure which is 8% higher than 2013.

That’s a massive amount, and paying it off is not that easy. Still, you’ve to try your best to eliminate it for the sake of your precious credit score.

Strategies that a student must follow

Every student should practice some habits to get a better financial future after completing their studies. But at first, they need some well-planned strategies to erase the huge student loan debt from their head. Have a look at some wise strategies to wipe out your student loan debts.

1. Understand your loan properly

Sometimes, reading the terms and conditions is not enough as you also have to understand the terms, interest rate, and the other conditions. In case, you don’t understand any point in your loan agreement, make sure you ask the lender before you fall into the trap. Moreover, it’s essential to keep a record of your balance and repayment status of your loan.

2. Start living within your means

Unless you have a job lined up for the day after you complete your graduation, you should always prepare yourself for some kind of emergencies. You can’t always be sure about grabbing the best job in the market soon after you leave college. Instead of relying on your credit cards and making the matter worse, save money aggressively. Say “goodbye” to the lavish life that you lead with your extravagant friends. Thus, you can control your extra expenses and can save money to pay off your debts.

3. Remember the grace period

Don’t skip your first payment date. Remember, there are different grace periods as the loans are different from each other. As an example, federal student loans have 6 month grace period but federal Perkins loans have 9 months grace period. On the other hand. private student loans have other rules. So, be sure about the paperwork. You can ask the lender about the grace period in order to make your first payment on time. Track all of your loans and manage your money for free with this amazing free tool that lets you track your net worth and see all of your student loans in one place.

4. Take advantage of Loan Repayment Assistance program

Loan Repayment Assistance program (LRAPs) give funds to meet monthly payments for those who are eligible. Ask your school or employer to know if they serve (LRAPs) for your private student loans.

5. Consider bi-weekly payment plan

Try to make an extra payment to close you student loan debts quickly. You can pay every week through the bi-weekly payment plan. Thus, you can end up making an extra month’s worth of payments.

6. Try to lower the principal

Federal student loans have a certain system regarding the payment. As per the system, you should pay any late fees first, then the interest and after that the principal. But if you have the ability to pay more, then try to pay more each and every month to reduce the principal and the interest as well. Send a written request letter to your lender in order to be sure that the extra payment will go to the principal. Otherwise, the lender may take it as future payments. Make sure you have all the copies of check and the necessary papers of your extra payments.

7. Take care of your expensive loan first

Try to start paying off the loan which has the highest interest rate. As per the experts, paying off private student loans first will be an intelligent step for those who have private student loans along with federal loans. This is because private loans have higher interest rates and also they have no flexible repayment options like federal loans. So you must find suitable repayment option to wipe out your debt.

8. Trim your credit cards usage

Try to curb the usage of your credit cards to get back on track. Always carry cash instead of credit so that you don’t have to repay your obligations with interest rates. Getting something that you can’t afford with cash is not at all good especially when you have a huge burden of student loan debt.

9. Know the options clearly

If you’ve federal loans, you can try to get help from the federal organizations. They offer you various loan payoff programs and options. If you’re still a student, you may be able to defer the loan payments till you’re able to get a proper job. There are also debt consolidation options offered by the federal organizations to pay off your educational debts. With debt consolidation, all of you government student loans are combined into a single loan and you’re required to make a single payment in order to repay it.

10. Federal student loan consolidation

Federal student loan consolidation is a wise choice as it is a Public Service Loan Forgiveness Program. As per the program, you may even be able to have the balance of the educational loan forgiven in lieu of your full-time employment in some specific public service areas.

Why is it a wise decision to go for Federal student loan consolidation?

  • Federal student loan consolidation is the best way to dissolve your student loan debt as:
  • There are no credit checks.
  • Co-signer is not a must.
  • You don’t have to keep anything as collateral.
  • You can get a tax deduction on the paid interest of your loan.

Final words

The government offers some grants for those who have private student loans with bad credit score. Try to find out these types of grants in order to pay off student loans. The government grants are available without credit checks and you’re not even required to pay back the money to the organization providing grants.

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