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9 Ways to Managing Your Student Debt

With the increasing costs associated with attending college, more students are turning towards student loans. Financing college without borrowing any money can be a challenge today. Fortunately there are several ways in which students can keep their debt under control.

Apply for more scholarships and grants

Scholarships and grants do not need to be repaid. For students, the best thing to do would be to contact the financial aid office to ask for grants available, fill out the necessary forms and try to get as much grant as possible to reduce the need of depending entirely on student loans.

Understand your loan

Private loans today offer very low interest rates. However, some of them require students to start making payments as soon as the loan is taken. Federal student loans offer the lowest possible interest rates and have very flexible repayment options. Payments usually do not start until education is completed so they tend to be the better choice for students.

The grace period

For each loan, the grace period would be different so it is important to keep this in mind. For example, Perkins loans have a grace period of 9 months after graduation while Stafford loans have a grace period of 6 months. For private loans, the grace periods vary widely so contact the lender or check the paperwork to ensure you don’t miss the first payment.

Lower the interest rate

The interest rate on the loan will determine the amount to be paid in total. Rates may go down or up during the life of a loan and each lender will have different rules on which it will ultimately depend. If you have a lower interest rate, talk to the lender to lock it in when possible. All payments made will first go towards covering the interest and the fees of the loan and not the principal.

Lower the principal

Try to pay more than the minimum monthly payment required on the loan since it will allow you to lower the principal amount. This will ultimate reduce the interest that has to be paid on the loan. Send a letter along with the payment, asking the lender to apply the extra payment to the principal and not the future payments. Always keep copies of all extra payments sent to ensure they are correctly applied.

Expensive loans

If you have several different loans, consider paying extra towards the most expensive loan first. Private loans tend to have a higher interest rate so start with those loans. Paying them off ahead of schedule will allow you to save a considerable amount of money in interest.

Loan consolidation

If you have multiple loans that you’re struggling to manage and successfully pay each month, consider consolidating them into a single payment with a fixed rate of interest. There are several advantages and disadvantages of a loan consolidation so weigh them against each other carefully. Look for a fixed low interest rate and carefully read all the terms and conditions. Avoid consolidating federal loans in a private loan since you’ll then lose out on borrower benefits such as loan forgiveness and unemployment deferments.

Loan forgiveness

Several different programs will forgive part of or the entire federal student loan for those who work with certain employers or work in specific fields. Federal loan forgiveness programs are usually available for nurses, teachers, those working in public services, nonprofit or government organizations. Private, school and state loan forgiveness programs are also available.

Do not ignore the problem

If you are facing serious debt issues, do not ignore the problem. Stay in touch with the lender since they can work with you to help you find solutions to your problems. Serious debt problems can lead to several long term, severe consequences and it can also put your co-signer at risk. Consult a debt counselor if you cannot find a solution to your problem.

Personal Finance for the New Graduate

Although money management skills are important, many people have a problem handling their personal finances. This issue is even more important for new college graduates. As they leave school they will be faced with repaying student loans while dealing with other expenses like rent and healthcare. Many new graduates do not find the jobs right away, making it even more important to manage their money.

With some planning and good financial advice, the new graduate can cover bills and save money for the future. Here are some tips that can help in managing your personal finances:

Create a Budget

This is probably the most important aspect of money management. It will take a few months before you get a sense of your spending patterns and expenses if you are new to budgeting. When you look at your income and expenses, this will give you an idea of how much you can save. If you are unable to save, examining the budget can help to decided where you can cut some costs.

Never use more from your credit card than you need to, and try to clear the balance each month. This will help you to avoid additional interest. Do not go shopping for clothes if you don’t need them, and avoid eating out unless you absolutely have to. Ultimately, your main goal is to keep your spending below the level of your income. This is the only way you will be able to save.

Reduce Living Expenses

This can mean getting a roommate and sharing the rent or moving in with your parents. Either way you can save a lot of money that you can put towards savings. For some grads, their parents’ home might be the best option since they can live there rent free. It is a good idea to contribute towards expenses such as food, but the bulk of your money should be saved.

Set aside Money for Emergencies

Some people save in a special account for emergencies. This savings is not used for daily expenses or other living expenses. At any time, a crisis may arise, such as a major health problem. Putting money aside in an account that yields high interest, such as a market mutual fund is a good idea. In an emergency you can pull from these funds without putting a strain on your budget. Note that it will take some time to create this sort of fund, so it is best to start early.

Get Books and Information on Money Management

You can search the Internet for used books that cover this important topic. Some of these books actually target new college graduates, so you will find that much of the information applies to you. Do some research on the author of any book you are thinking of buying. This will help to ensure that you are getting advice from a qualified person.

The Internet has lots of information on money management that will come in useful to you now and later on in life. Learning what you can and applying some of these tips to your own life will help you become financially independent.

Avoid New Debts

Do not create any new debt unless it is for something vital. This is even more important if you have student loans to deal with. If you are struggling to get by, that is not the time to buy new furniture or a new TV, even if these items are on sale. You should also try to clear your existing debts as quickly as possible.

College students and recent grads need to be smart in the way they handle their money but they don’t have to be experts. Personal finance involves common sense decisions such as putting extra money towards their student loan. This is a smart move as it helps to clear your loan quicker.  Aside from saving money, it is wise to invest money in mutual funds and similar investment instruments. With discipline, you can end up with enough money to help clear debts or make a down payment on a house.

Funding Your College Education

In USA, finding a way to pay for college is a big concern for many people who want to further their education. Everyone knows that a college education is not cheap, and many people graduate owing thousands in student loans. Annual tuition can run anywhere from an average of $8,000 to $30,000. Costs could be higher if student is from out-of-state or an International student.

Thankfully, there are ways to pay your college education that will leave you owing less money. Some creative graduates have even completed their education debt-free. While some of the options are not easy to access and are definitely not for everyone, they are worth trying. Following even one of the steps below can help you with paying for college.

Minimizing Student Loan Debt

It is possible to leave college without a lot of debt hanging over your head. The good thing is that you can start planning and working towards a debt-free college education while still in high school.

Advanced Placement (A.P.)

This is a great way for a high school student to earn college credits before actually going to college. This means that you will need fewer credits in college. Check with a few colleges to see if the courses you want to take in A.P. will count towards your major or general courses. This will help you decide which courses to take in Advanced Placement.

Of course, there are other ways such as taking some college courses while you are still attending high school. Taking online courses can build up college credit and you can even be exempted from some courses. Online study might also work for you since you won’t have to worry about expenses like transportation or accommodation.

Scholarship

Don’t feel that only the brilliant kids can get scholarships. Even students who don’t have the top grades can get scholarships and bursaries for college. The wide variety available will surprise you, but you need to search for them. Your school counselor will probably know about scholarships that you can apply for. One website that is very useful in helping people find suitable scholarships is FastWeb.com.

Accelerated programs

These kinds of programs help you complete college sooner than the normal three to four years. It does mean more school work, but if you are organized enough to manage the increased workload, this is a good option. The longer you remain in college the more you pay and the longer you will take to start working.

Working While Studying

This is an age-old method of paying for college. Again, it is not for everyone as some people will not be able to juggle a job and schoolwork. However, if you know how to manage your time, you can work your way through college. You will end up with less debt after completing your studies.

Finally, after you graduate, think about programs that can help to shrink your student loan debt. One of these is the College Cost Reduction and Access Act of 2007 for full-time public service workers. If you have ever thought about working for the government, you should explore this option.

Choosing the Right College

Depending on the college you choose, you can significantly reduce the cost of your education. Some people apply only to big name schools, overlooking great colleges that charge lower tuition fees. They also avoid community colleges which are cheaper than traditional colleges, even though they offer similar programs.

With the right approach and some planning, it is definitely possible to leave college without a huge debt hanging over your head. For those who have the right grades and students who are willing to work hard, it is possible to go through college almost for free.

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