Debt is a major problem for students in the U.S. and it has been getting worse in recent years. According to Sallie Mae, the nation’s leading provider of education funding, the average undergrad carried $3,173 in credit card debt last year — the highest on record. After graduation, the average college student is left with $22,700 in debt upon completing a 4-year degree. And for the first time ever, student loan debt outpaced credit card debt in the U.S. with $829.785 billion in private and federal student loans in 2010. Below we’ll outline some tips for reducing student loan debt and options to consider for debt relief:
1.) Call Your Creditors
If you’ve been falling behind on payments or are finding it difficult to make ends meet, call your creditors to discuss all your options. The biggest blunder committed by many students is to refrain from contacting their lenders when times get tough. Most people try to avoid their creditors when they can’t make their monthly payments, but this is definitely the wrong approach. Be proactive and communicate with your lenders since they have a vested interest in finding a solution. They can guide you through the process and may have some good advice to get you back on track. They may even offer assistance with late fees or extend your due dates.
2.) Ask for Deferred Payments
If you’re having trouble making payments due to a sudden job loss or temporary financial crunch, you can ask the lender to defer your payments. Deferment is an option where the lender defers your payment for a specific period of time and then you can resume your monthly payments at a later date.
3.) Consider a Break from School
This isn’t an easy choice for students to make, but if you’re having trouble with student loans or excessive credit card debt, it might be worth taking off a semester or two to start catching up. With the extra free time you can find a temporary job or increase your existing work hours to earn more money and pay off your bills.
4.) Ask for forbearance
As with deferred payments, forbearance is another temporary solution. If your lender accepts a forbearance option, you’ll be allowed to make reduced monthly payments at a reduced interest rate. This type of relieved payment option is for a short period of time after which you have to resume the normal payments with the normal rates. This is great if you’re going through temporary financial struggle, but it won’t last forever.
5.) Debt Consolidation
Both private and federal student loans can be consolidated through a debt consolidation loan. Although the process of consolidating federal and private loans is different, both can be accomplished by an experience debt consolidation program. Obviously, your credit card debt can be consolidated too. With all your monthly bills combined into one, reduced monthly payment, it will become much easier for you to pay your monthly obligations. Plus, the reduced monthly burden will last the entire length of the debt consolidation loan.
Any expert will tell you that education debt is “good debt” and that it’s a worthwhile investment. It’s a known fact that a college degree produces higher earnings throughout your lifetime, and this will offset the burden you’re dealing with right now. But it’s important to consider your financial health before — and after you graduate. Consider these options above to ensure you don’t fall behind or get into a situation that is even harder to resolve.
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