With any loan, repayment is necessary. Proactively managing the student’s educational loans will not only save the student money but also build up their credit history. Of course the best way to repay student loans is to make regular payments for a cheaper and better interest rate.
Other options for paying back student loans also includes the use a tax breaks that are available, exploring the options for repayment plans with your lender, consolidating the student loans, and also deferring loan payments to avoid any disruption with your credit history.
Paying your monthly payments on time is the biggest part of paying back your student loan debt. Most private lenders will take off 2 percentage points off of the interest rate, as long as the borrower has at least 48 consecutive non late payments towards the student’s loan.
Also, a big plus is that if the student’s bank transfers their payments electronically from the student’s checking account, many lenders will take off a quarter of a point off of your interest rate.
The student will want to ask about any alternative forms of repayment for their student loan. The student can also arrange a graduated repayment plan, assuming that the student’s salary will go up in time. The student can begin with low monthly payments that will slowly rise over a period of 12 to 30 years, of course depending on the amount of the student loan.
In the event that the student’s income fluctuates due to self-employment, the student can also choose to set up an income-contingent or income-sensitive repayment plan for their student loan. This means that as the student’s income falls and rises, their amount that the student owes does also.
According to the Department of Education the income-incontinency plan is available for direct-loan borrowers and any balance that remains after 25 years is forgiven. However, the set amount that is forgiven will have to be taxed as income.
Just keep in mind that alternate repayment plans will cost the student more in interest because the student will pay back their loan over a longer period of time.
A student can also take advantage of tax breaks. The Federal government does offer a relief for taxpayers with open and active student loans. Assuming that the student’s income makes them eligible, the student may be able to deduct the interest that the student pays up to a maximum amount of $2,500 a year.
The income requirements limits to qualify for a partial or full deduction has to be less than $65,000 annually for individuals that are single, and has to be less than $130,000 for couples that are filing jointly.
You will always need to keep in mind that if you have more than one student loan, you do have the option to consolidate them. This will mean that the student now has a new interest rate that will be applied to the student’s outstanding principal. This rate will not exceed 8.25 percent but will equal the weighted averages of all of the student loans.
Usually during the student’s course of their repayment to their loan consolidation the lender will offer discounts, particularly if the student has had a steady and consistent repayment record.
By consolidating student loan a student can lengthen the terms of the student’s repayment that can substantially increase the student’s total interest that the student will pay. If the student has exhausted their options and the student can’t get relief, then the student may be able to suspend the student’s payments temporarily.
If the student gets a deferment for a subsidized Stafford loan, then the government can actually pay the interest that comes due during the student’s suspended payment period. The student can still hold off payments for up to a year by asking for forbearance, if the student can’t get a deferment. However, the student’s interest will continue to accrue, although the student can now avoid defaulting and in turn giving the student a bad credit history.
Paying Back Student Loans – Make Use of IBR Plans
A few other options include using Income Based Repayment plans (IBR) and applying for scholarships and grants.
Paying back student loans can be a huge financial burden but with IBR plans available, life can be easy once again. Income Based Repayments plans are when government loan officers take a look at your current income and then they come up with a repayment plan that fits that income. Students with graduate degrees have monthly payments of over $1000. However, that payment can drop to $200 with an income based repayment plan.
There are a few pro’s to choosing an income based repayment plan such as giving you an eligibility for a loan forgiveness. This can be possible if the student chooses to work for the government or if the student works for a non-profit organization or works as a volunteer.
Income Based Repayment plans also open up new opportunities for potential and current students to make career and college choices without focusing so much on the burden of expensive loan payments. An Income Based Repayment plan can help cushion the pay cut the student may experience when shifting from a senior position in one field to an entry level job in another.
If the student’s circumstances change and the students finds themselves in a high paying corporate job, the student loan payments should adjust to reflect the student’s new salary.
Income Based Repayment plans should become available for student during the summer of 2009 for graduates holding student loan accounts with the Department of Education or with a select private lender administered by the Federal Family Education Loan Program. Debt forgiveness options are available only to students participating in the government’s Direct Loan program.
To get maximum benefits from income based repayment options, financial advisors recommend consolidating your loans with the federal government.
You can also apply for many scholarships and grants to help pay off your debt with student loans. The best thing about scholarships and grants is that you never have to pay them back.
However, the federal government isn’t the student’s only source of assistance for students interested in community service jobs. A lot of colleges as well as universities offer special tuition waivers, grants, and other forms of financial aif for students who pledge to work in public interest jobs.
Private foundations also raise funds to provide scholarships and stipends for students who plan to work in special niches of law, government, and fine arts.
Teachers enjoy student loan forgiveness programs in many states, as do many military personnel. With the help from multiple sources, the student can enjoy a rewarding career in service to your community without the sacrifice of crushing student loan payments each month.
Voluntary Service provides a graduate the opportunity to join Americorps as well as other voluntary organizations. When the student becomes a part of these voluntary services their student loans become waived. Keep in mind that grants as well as scholarships are not included.
Teach for America is a program specifically for students in the career field of teaching. In this program the student can go to low income communities and teach the under privileged students there. Using this program student loans are waived of at least $5000 per annum.
If the student chooses to join the military service then a loan amount of up to $20,000 can be waived off of your student loans. The student can get even more pay off is the student can get stationed in high risk stations.
The two best areas where the student can get pay off for their student loans for up to $25,000 are the social work and health service fields. Physical and occupational therapy are also areas that can give the student relief on their loans.
As law graduates if the student serves in public interest and non-profit organizations then the student can ask for a student loan forgiveness also.
A lot of the times if you work, your employer may offer a type of tuition assistance. Many businesses and companies do provide a tuition assistance especially if the field that the student is studying in is relevant to what your current position is.
If the student does not work, a great option would be to become a part of a work-study program. Work-study program jobs are usually a part of the students financial aid package and work is conveniently on campus.
Whether the student chooses to work with a private employer or work on campus through the work-study program, the student will want to try to save at least half of the student’s income in high interest savings account.
This money will come in very handy and can be applied toward your student loans to deduct your pay back amount of your student loan.
There are many, many ways for students to repay back their student loans. A lot of the times you can research and find tons of ways to help paying back student loans quickly and easily.
Ask your college or institute if they have any options available locally for the student to have assistance in repaying back their student loan debts. A lot of the times your college will have listings among listings and programs formatted specifically for students to pay back their loans partially if not completely. However, even though a student is left with a loan to pay back, this should not discourage a student from furthering their education.
There are always options, plans, programs, and grants that can provide the student with assistance on paying back their student loan debts.