When you consider that nearly 60% of the graduating class of 2011/12 have over $26,000 apiece in student loan debt, you begin (just begin) to realize the depth of the student loan crisis in the United States. Understanding the options that you have for paying off this debt, and paying it off as quickly as you can so that you don’t pay thousands more in interest, might help to save you money over the next few years. That information is below. Enjoy.
First, one of the easiest ways to shave 0.25 percentage points off of your interest rate is to sign up for automatic debit payments on your monthly loan payment. Do that and your interest rate drops immediately.
If lowering your monthly bill is what you’d like to do, and you have over $30,000 in federal student aid loans, you can extend your repayment period up to 25 years. Keep in mind that while this will certainly lower your monthly student loan bill, the actual amount that you will repay will be higher and, if you take a lot longer, significantly higher.
If you’re not earning a lot of money right now, you can actually have some of your debt forgiven or, at the very least, make smaller loan payments. Pay As You Earn, for example, is an income-based repayment plan that lets you pay 10% of your discretionary income for your student loan over a 20 year period. At the end of that time any money remaining will be forgiven by the federal government.
If you received any sort of grant from the federal government, for example the TEACH grant, dropping out of any repayment program that you’re in might cost you. With the TEACH grant for example, if you don’t complete your four years of teaching low income students (one of the requirements) your $4000 grant will convert to an unsubsidized Federal Direct Loan and you’ll need to repay every bit of that money.
Depending on what you have to offer, and where you’re willing to live, you’ll find that many small towns around the country will offer a lot of student loan debt relief. In Kansas, for example, there are over 70 rural counties that will pay upwards of $3000 per year towards your student loans.
Keep in mind however that you’re going to have to pay taxes on any loan forgiveness awards that you receive.
Finally, be aware that interest rates on some subsidized Stafford loans are now beginning sooner than they used to. For example, it used to be that there was a six-month grace period before a new graduate had to begin paying off their student loan but, for any loans that were issued between July 1, 2012 and July 1, 2014, as soon as you graduate your loan will begin to accrue interest.
Knowing this information, and knowing the options that you have for repayment, will help you to make the decisions necessary in order to pay off your student loan debt as quickly and affordably as possible. Keep in mind that no matter how you decide to pay, the faster you pay off your student loan debt the less it will cost you in the long run.