Now more than ever students are mired in debt. In America, student loan debt has amounted to a staggering $1.2 trillion; an estimated 40 million of its young citizens are beset with it. In the UK, student debt is set to cost the government £8 billion in write-off programs over the next three decades.
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Many of these loans follow individuals into old age. According to the US Government Accountability Office, adults aged 65 and above, representing 706,000 American households, were saddled with $18.2 billion in student debt in 2012. GAO estimated that 7 million ended up defaulting on, or failing to repay, the loans.
Student loans are indeed difficult to write off or ‘forgive’ compared to home mortgages. But that doesn’t mean you, dear borrower, can’t repay them faster. Here are some ways how:
1. Take responsibility.
As with debt of any kind, the first step is not to shirk blame. Own up to your debt. Realise that you owe someone money, and realise why you took out the loan. Avoid incurring debt in the first place by knowing the tuition fees of your chosen institution and the living expenses involved.
2. List them down.
Studies show that student borrowers tend to take out at least four loans. Try to remember all your loans. Tabulate them, their outstanding balances, due dates, and servicer/s. If you’ve forgotten the details of your federal student debt, jog your memory through the national student loan database. Your credit reports can help you remember private loans.
3. Focus on the costliest debts.
Prioritise those loans with the highest interest rates, as you will end up paying more over the course of the debt repayment. If you have incurred debt with your credit card, especially one with a lofty annual percentage rate, make it the highest priority.
4. Avail of the government’s repayment programs.
If you have taken out a loan provided by the government, then you are eligible for a number of repayment plans based on your income. In America, you may be eligible for pay-as-you-earn programs that cap repayments to 15 percent of your income. If you’re a government employee or public service worker, you stand to have your outstanding balance forgiven after 10 years of diligent paying. Even unemployed individuals are eligible for forbearance or deferral plans.
5. If your wallet allows, pay extra.
Try to make an extra loan payment in those months that have extra weeks. Do this and you may just prevent interest from stacking up.
6. Automate your payments.
Many of us don’t have the self-control to pay on time, let alone in adequate amounts. The solution lies in these automatic withdrawal methods that remit your payments punctually.
7. Consider (or reconsider) consolidation.
Loan consolidation used to be the number one prescription to getting out of debt but it is steadily growing irrelevant, what with borrowers now having the option of a single payment through one servicer. Also with consolidation nowadays, you risk losing advantageous repayment terms native to the loans. Then again, consolidation is always a great way to organise your debt.
8. Grasp reality.
Be realistic about the amount of debt payment you can afford each month. Use a repayment calculator to know for sure just how much you can pay.
9. Hack down your flexible expenses.
There are things this week you can cease doing to expedite your repayment. You can cook meals at home. You can stop buying on impulse. You can cut your mobile phone plan. Do what you can to free much-needed money for payment. While you’re at it, try moving to a cheaper rental.
10. Find another stream of income.
Endeavour to find a second (or third) source of income. This not only accelerates your repayment plan, but also reduces your repayment period.
11. Leave something for yourself.
Don’t throw all your money at debt, or you will risk compromising your cash flow in the event of an untoward financial event.
12. Just do it.
As soon as you can, start making payments immediately. Try to make any amount of payment even in school. Even if it’s just $10 a month, everything counts. Above all, live within your means.
