Congratulations on graduating from college. This is just the beginning for you and you will be able to move into your career and start making a better life for yourself, but first, you need to make sure that all of your student loans are paid off.
Unfortunately, student loan debt is a growing problem and it is not going to stop until there is an intervention. In fact, most students who graduate with a four-year degree have accumulated roughly $30,000 in debt. This is a lot of debt and the longer it sits, the more interest accumulates on it and the more money you will end of paying. In fact, some students end up paying upwards of $75,000 for an original $30,000 loan that they took out.
If you are unable to transition into a high paying job once you get out of school, you will find that you end up living paycheck to paycheck or you have to give up some of the things you love until all of your loans are paid off.
Fortunately, there are some student loan repayment options and plans that can help you pay down your student debt without having to sacrifice everything you own. Below, we will go over some of the different ways that you can beat your student loans and pay down the debt quickly and easily in your situation.
Income-Driven Repayment Plans
One of your first options for paying back your student loan debt is an income-driven repayment plan. This plan offers you the convenience and flexibility to pay back your loans based on your income and not a set amount based on an algorithm.
There are a few different types of income-driven repayment plans including the pay as you earn program, the income contingent plan, and the income based plan. Each plan offers you a variety of options and benefits of choosing it. Of course, not all students can choose these plans and you must qualify and meet the requirements to enroll in the plan. Often, your loan provider will require that you register and show proof of qualification every year or two years.
For these income-driven repayment plans, the amount of money that you pay each month is determined based on your discretionary income amount. Students do not have to pay more than 10 or 15 percent of that determine income, which means payments for low income students can be $0 and other students who meet the qualifications will receive low monthly payments as well.
Another great thing about this program is that students will be able to receive student loan forgiveness once they have made 120 qualifying payments.
Refinancing is another option available to you when it comes to your student loans. Refinancing is not available to all students, so it is important that you completely review your options and look over the requirements prior to applying for refinancing.
While refinancing may not be available to everyone, it does offer quite a few benefits such as a lower monthly payment, lower interest rate, and a longer repayment term. When you do choose to refinance your student loans, make sure you take time to review your current benefits and whether or not you will be losing any. Often, when you refinance a federal student loan through a private lender, you will lose all of your federal benefits such as the flexibility with payment plans.
Employer Student Loan Repayment Benefits
If you are employed or plan to be employed, you should discuss student loan repayment benefits with your employer. While not all employers do offer this type of a program, some do and others may be willing to work with you.
The way this program works is that you work for the employer for a certain number of years, usually three to five, and provide services to the company. Once you have successfully completed the term period, the employer will then provide you with money toward your student loan debt. The money you receive is applied directly to your loan balance to either lower it or completely pay it off. Many times, companies will offer an employer student loan repayment program where you receive a set amount of money after the first three years, then you can receive more money after each additional year of employment up to a certain amount of money.
If you are unsure of whether or not your employer offers this program, sit down and talk to your HR department representative.
Saving for Retirement vs. Paying Off Student Debt
Money for retirement is a necessity, especially if you want to retire someday. The startling truth is that many individuals have not even started saving for their retirement or they had to use the money they had when the economy was in a bad state. This means that many of these people will need to work until they are 75 or older and that is not something to look forward to.
If you have student loan debt and you want to save for retirement, you may find yourself in a bit of a pickle, but you do not have to and it is possible. For starters, you should budget how much money you have to send out per month in bills and include your minimum student loan payment in this. The amount of money you are left over with once all bills are paid can be split three ways: 1) your personal savings, 2) your retirement plan, and 3) your student loan debt.
You should always at minimum split the amount leftover between your student loans and retirement, that way you pay more than the monthly amount, so your loans will be paid off quickly AND you are saving for retirement at the exact same time.
Whether you choose to refinance your loans, apply for an income-contingent plan, or you want to save for retirement, you will find that all of the options above have your best interests in mind and will help you better afford your student loan payment while helping you pay it down quickly.
Tyler Garcia is a recent Finance graduate from Fordham University. Tyler grew up in West Chester New York in a large family of 8. Tyler enjoys studying the financial markets and writing about personal finance in his free time. Tyler is about to start a full-time job in New York City as a Financial Advisor this July. Tyler plans on contributing a number of articles to the website in hopes of helping Millennials better manage their personal finances.