Managing your Student Loan
The cost of a college education rises every year. Most people would never be able to afford a college degree if it weren’t for the Federal Aids Programs. The government offers several options that help students pay for their tuition. Stafford loans, PLUS loans and grants are all available to students who need extra financial support. Many colleges have their own level of aid that they can offer to their students. Work-study programs exchange tuition costs for working on-campus which can help make college a possibility for many.
After graduation, student loans will enter repayment status. If you find your monthly payments are becoming hard to meet, there are several options that can save you from default. Consolidating your loans is one of the most common ways to manage loan payments. It simplifies life by rolling all outstanding loans into one. This can lower your monthly payment, but it may cost you more money in the long run. Consolidating usually extends the term of the loan which means you will be charged interest over a longer period.
There are options available to borrowers if they are facing financial hardship. Forbearance is fairly easy to qualify for. In forbearance, the lender permits the borrower to stop making payments for a period of time. It can be granted in twelve month intervals for a maximum of three years. The borrower is obligated to pay all interest that accrues during this time.
Deferment is also a temporary suspension of loan repayment. There are certain circumstances that will qualify a borrower for deferment. If a borrower re-enrolls in school, loses a job, or faces extreme financial problems, a lender may grant deferment. Any subsidized loans will not accrue interest during the suspension period. Un-subsidized loans will earn interest that will be added to your loan. Whether you apply for deferment or forbearance, you must continue making payments until you receive confirmation from the lender.
Reduce Your Loan by Planning Ahead
The best way to reduce the cost of your student loan is to plan ahead. It is never too early or too late to save for college. Building a budget that includes college savings is a good first step. Investing your savings into an education account will help make your money grow. They are tax-free and do not have penalties for making withdrawals.
Many colleges are now offering pre-paid tuition. Potential students can pay into a college that they wish to attend. The advantage is that you are locking in a tuition cost and will not be affected by tuition increases. The disadvantage is that you will lose potential interest earnings and face taxes and penalties as well. This plan does not guarantee admission into the college.
Tuition is not the only cost of a college education. Books, lodging, and transportation all add up quickly. Buying used books and living on-campus can help save money. Finding a job that works around your class schedule is essential if you don’t have any savings.
College can be affordable if you plan ahead, learn to save, and are willing to make sacrifices for you education. Whether you are planning for college or repaying your student loans, you need to be actively managing your affairs. Formulating a plan will help you achieve all your goals.