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Blog Posted in avatar   Aymen Zaben's Blog

Student Loan Debt: What You Can Do To Make Your Life Easier

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By Aymen Zaben
Posted Aug 29, 2012 in Lifestyle
Should I take a semester off to work and put some money in the bank? Maybe I should stay in school and get a Masters or Doctorate degree since I'm already so far in debt? Will I find a secure position in today's job market so I won't be delinquent on my student loans? These are all questions that recent and soon-to-be college graduates may be asking themselves. However, controlling student loans could take place before you become a college student or early in your college career.
For future and current college students, I can't express how important and worthwhile it is to look into grants and scholarships that you will not have to repay. Contact the financial aid office at your college and ask what is available and how to apply for this free money! You will be very glad that you did this once you are out of school and the “real world” is upon you. Now, for those who will soon graduate or have already graduated and have a debt to be repaid, the days of scholarships and grants has passed, but all is not lost!
With economic hardships all over the news and affecting so many people, the thought of graduating in today's world can be very daunting to say the least. Add the stress of tens of thousands of dollars of student loan debt to a recent college graduate, and all of a sudden “adult life” doesn't seem nearly as fun or exciting as it once may have. However, as overwhelming as this may all seem, there are methods to manage what may seem to be the “Mount Everest” of debt to the newest members of our workforce.
First and foremost, and probably most obvious, the need to find a job is at the top of the list. If no one is knocking on your door with an amazing job offer, you may need to take a job that is less desirable for the short term. Even if it is only a fraction of what you may want to make, having a job is better than not having a job in several ways.
By working, you are bringing in a steady income. With the steady income, there are bills that can be paid and experience that you can put on your resume. All too often, students graduate and expect the world on a platter, but the fact is, you need experience to move up in the corporate world. Is it better to have a gap with no employment history on your resume when you apply for that dream job, or is it better to say that you worked a lesser paying job due to having responsibilities, gained experience, and are that much more prepared to take on the current job that you are applying for? In a nut shell, don't be lazy. If you find someone willing to hire you and have no better offers on the table, accept the job and make the best of it.
Now, let's say that you are down and out and have absolutely no offers coming in. At this point, you can contact your lender and ask about deferment or forbearance. Out of the two options, I would say that the deferment is the better way to go.
While there are generally stipulations, a deferment on student loans shouldn't be all that hard to come by. If the U.S. Government is your lender, you will generally be allowed 36 months of deferments with each deferment lasting 6 to 12 months. When one gets a deferment, the loan is essentially frozen with no interest accruing and no payments having to be made. Conversely, a forbearance is the other option to prevent you from being delinquent on your student loans.
A forbearance on a student loan offers two options. Like receiving a deferment, you can stop loan payments. However, unlike the deferment, the loan will still accrue interest, but you can handle this in two different ways. You can either pay interest-only payments where you pay nothing on the principal but only the interest that is accruing, or the lender will attach all accrued interest to the loan itself. This is a temporary fix that will ultimately cost you more money in the end. Although, this route is still much better than being delinquent on the loan and ruining your credit!
If you are lucky enough to find a secure job before or directly after graduating and have been able to consistently pay down your student loans, there is a great long-term approach to shorten the life of the loan by taking advantage of the amortization schedule which any lender should be able to provide if you ask for it.
The amortization schedule is a financial statement that will show you each payment that you will have to make over the life of the loan and how much of that payment will go toward the principal and how much will go toward interest. As a rule of thumb, the amount that you pay toward principal will increase over time while the amount payed toward interest will decrease.
Let's say for the purpose of easy comprehension that your student loan payment is $300 every month for 30 years, with $100 going toward principal and $200 toward interest. If you payed an extra $100 per month for a total of $400, you would be saving yourself $200 in interest each time because you are shaving off an extra month's worth of principal and also saving on that interest. This would also cut the life of your loan down to 15 years since you would essentially be paying 2 principal payments every month. Even if you couldn't afford to pay the extra $100 per month but were only able to pay an extra $50, you would still be paying an extra 6 month's worth of principal payments each year and would cut 10 years off the life of the loan.
As the saying goes, hindsight is 20-20. If you weren't one of those students that applied for grants and scholarships and saved yourself thousands of dollars in the process as a student, there are still ways to successfully tackle that student loan debt. Whether it be getting a deferment or forbearance, or paying a little extra each month on your loan, this wall of debt can be managed and broken down one piece at a time.

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