In America, higher college education is an expensive investment and most parents end up borrowing money from various financial institutions. Student loan is a hefty debt that gets accumulated quickly and most borrowers find the phase of repayment difficult. If you are not able to repay your student loan, don’t feel despaired. This is because there are few steps to make the situation much more manageable.
Do Your Homework
Firstly, you must research your options exhaustively. Federal student loans have different types of repayment methods, namely loan forgiveness, deferment and forbearance. If you are unaware of these repayment strategies, you should do adequate amounts of research in sites like studentaid.gov and also approach private loan lenders.
Know Your Limits
Secondly, you should keep your loan expectations within feasible borders. Don’t choose a reimbursement method without knowing about its real pros and cons. Sometimes, you must forego your lifestyle and cut down luxuries for a smoother reimbursement session. Always remember that with hefty loans on your shoulder, you must give more priority to its monthly payments.
Take a Longer Look
When you are looking to get a student loan, you should consider it in the longer run. If you pay a smaller amount every month, the loan duration will seem like a lifetime. According to experts, you should try and reimburse your student loan as quickly as possible. Bigger monthly payments will help you repay your loan quickly.
Commonly Used Graduated Repayment Schemes
For a promising future, you should sign up to a graduated repayment scheme. These schemes will help you repay loans in a systematic way. If a monthly payment is too high for you, the graduated scheme will cut down your loan amount drastically. Meanwhile, if your income is above average, you can opt for a bigger monthly payment. Always bear in mind that the amount you repay will depend on your lender, their policies and your income. There are three different types of income based payment schemes. Commonly used ones would be as follows:
- Income based repayment will let you make monthly payments at the level of 15% of your average income. The payments should be made for 25-long years. The balance incurred after these 25-years will be relieved.
- Secondly, you can make payments as you earn. Just like IBR, you should pay 15% of your income every month.
- Thirdly, income contingent repayment will let you pay 20% of your monthly income. Just like IBR, you should pay for 25-years and the balance amount will be forgiven.
Secondary Methods of Repayment
On the other hand, you can ask your employer to help you out with your student loan. Some companies and government organizations tend to offer special schemes for their employees. They have customized plans to help them. Likewise, you can opt for a loan consolidation. This is a strategic method used by many students and parents. Loan consolidation will reduce your monthly rate of interest. The Federal consolidation application should be applied through the US Department of Education. There are plenty of ways to consolidate federal and private loans.