Are you the one who want to know how to fix student loan crisis? Then you have come to the right place. The guide depicts a real story where people like Joshua shares his experience on how to repay student loans.
Thus, if you borrowed money to pay your tuition, you are not alone. Joshua Miller has been there too but today, he owns a finance blog that focuses solely on how to repay loans. The Federal Reserve estimates that in quarter two of 2021, Americans owed a startling $1.73 trillion in student loans. Nevertheless, your question should be how to fix the student loan issue. There are no magical solutions to it, but there are things you can definitely do to fix the issue. This post contains an overview of student loans and how to fix them. Below are some of those tips. Read on to find out more!
Table of Contents
List of Tips on How to Fix Student Loan Crisis
You will find a handful of tips to help you fix the student loan issue.
1. Know-How Much Student Loan You Owe
The first step towards fixing the student loan issues is to know what you owe. You should have a record or statement for that, review it. Find out your total deficit, the loan service you owe – including federal and private lenders, and the interest rate for the loan. After a thorough understanding of the loan, you can then proceed to repay them.
2. Evaluate the Payment Options
The kind of loan you owe, how much you can pay, and your financial goals determine how you would repay the loan. We all have different financial goals. “Some people want a long-term repayment plan that gives financial flexibility in their budget, while some want to pay off their loans quickly”. I wasn’t married at that point, so I had less responsibility, he said. “But I choose a long term repayment method”. I needed financial flexibility.
3. Use the Grace Period Wisely
You are not expected to start making payments immediately after graduation. You are allowed some time – grace period – before the loan starts to count. “For federal student loans, the grace period is usually 6 months after graduation” Joshua said, “but the length of your grace period depends on your lender”. Most private lenders charge interest during the grace period and it is added to what you owe.
You should take advantage of this period and pay in advance when pay part of your student loan within this period, it reduces the interest and invariably what you owe.
4. Consolidate or Refinance Your Loan
If you want to combine two different loans, then loan consolidation allows you to do that by imposing an interest rate that mirrors the average rate you paid across your net loans. In other words, multiple loans are merged into one. “This choose worked for, plus my student was a federal one”, he said.
With a refinancing, a new loan is taken out to repay the old one such that you end up with only one monthly payment. If the new loan has lower rates compared to the total interest rate, you could save money.
However, you need a good credit score to qualify for it. This option works for both federal and private loans. Most time I don’t advise people to go for this option. The downside to it is that you may lose some loan protection like deferment or forbearance period on federal loans, Miller said. If I’m being honest with myself, I’m happy I didn’t use the refinancing strategy.
5. Make Payments Automatically
Having an outstanding debt may affect you’re your credit score. You do not want to destroy it further by being late on your payment. You can schedule your loan payments to be made automatically. Although I had my repayment period set for long-term, I still made payment automatically”. The monthly rate was deducted from my checking account. That way, I made payment before the due date”. If you’re lucky, you may enjoy a discount from your lenders for making early payments. Autopay is accepted by both private and federal loan servicers.
6. Pay Biweekly – How to Fix the Student Loan Crisis
Another way to fix the student loan issue is making payments twice a month rather than once a month. When you view it critically, it’s like making extra payments each year. All of which will hasten up the repayment. But you need to speak to your lender about it. You can either make biweekly payments with autopay or on your own through your online banking access. The pay-yourself-biweekly payment allows you a form of financial flexibility. You can only make such payments when your budget is buoyant.
7. Pay a Little Over the Monthly Rate
One thing with debt is that you want to sprint through the repayment period not crawl through it. One way to do that is to pay more than your monthly minimum rate. Joshua was able to pay off a 3 years student within a year and a few months. If you want to adopt this method too, I advise you to take it one loan at a time. Start with the debt that frees up the cash flow – perhaps one with high-interest rates.
8. Divert Unbudgeted Cash to Loan Repayment
After allocating money for your basic need, divert the leftover cash into loan repayment – if there is any cash left. Although you have the monthly rate been deducted, if you adopt this trick too, you’d fix the student loan issue fast. “In my case, there is usually nothing left from my monthly income, I had to use other funds for it”. Mostly salary bonuses, passive income earnings, and cash gifts. The aim was to cut off chunks from my loan. If you have an inheritance or insurance benefits you can also use that to repay the loan.
9. Try Reimbursement and Loan Forgiveness
Loan forgiveness is for students who major in careers in public services. If that’s the case with you, congratulations. You would be required to make several payments, and the rest of the debt is canceled.
But if you are not eligible for the loan forgiveness, try a reimbursement. Some private firms make provisions for that. You should speak to your HR personnel.
Come Out of How to Fix the Student Loan Crisis
Student debt won’t go away if you close your eyes. You have to tackle it proactively to get it over with. The sooner you pay them off the better. You should take steps towards fixing the issue of student loans. If you feel overwhelmed by it, you should speak to your loan servicer.