Student Loans and the Options You Have

Once upon a time a student only needed their bachelor’s degree to guarantee themselves a job after graduation. But employers are increasingly looking for a master’s degree or PhD and the bar has risen for students everywhere, as has the cost of education.

What students often don’t realize is the amount of debt they find themselves trapped in upon graduation. And forget about paying off those loans in any respectable time if you don’t find a job straight out of school. While payday loan services like Wonga offer temporary solutions to recent graduates that find themselves flailing, their solutions are only temporary and if borrowers use them for more than emergency solutions, they’re likely to find themselves in over their heads.

Many students have resigned themselves to the fact that they will be paying off loans well into the future. But by acknowledging their debt and setting a clear plan of action, students can be sure not to let themselves fall too far behind.

The first thing students should do upon finishing school (and ideally even before) is determine what amount is owed to whom. Federal loans may come from a variety of different lenders and it’s important to know where your money will be going. Make a list of the loans that will be facing repayment and the dates that repayment begins.

If your life is still a jumble by the time repayment rolls around, look into deferment options. Deferring your loans means that your repayment date will be pushed back; but be careful when resorting to this as you may still be responsible for the interest that accrues while your loan is waiting to be repaid. Students can also consider consolidation, or the combining of loans into one large sum for repayment. Sometimes consolidation can make your life a lot easier, but again consider all options before making the decision. Consolidating loans can erase some of the debt forgiveness options out there and the last thing you want to realize ten years down the line is you could have knocked off a quarter of your debt but now don’t have that option.

If the mountains of debt seem insurmountable to you and you’ve weighed all your options, check to see if you’re eligible for income contingent loans, loans where your monthly payments are decided not on the amount you owe but the amount of money you’re making. In the end, you may be better off paying smaller amounts on a monthly basis and dealing with earning more interest while you pay.

But the best way to avoid student loan debt is to simply be smart when borrowing. While it seems commonsense that what you accept from the government you’ll have to pay back, it may be hard to put down the debit card when you see the money sitting so enticingly in your bank account. By only taking what you need and returning the rest, you’ll be saving yourself a lot of headache and worries down the line.


  1. says

    We wrote last month about a request for input by the Consumer Financial Protection Bureau (CFPB) on student loan affordability. CFPB is asking for input from borrowers, students and any and all interested parties on how debt repayment for educational loans can be made more affordable. The House recently passed a 2014 budget proposal that included drastic cuts to many income based repayment plans – these are lifelines for those suffering under the weight of oppressive student loan debt. It’s important that you raise your voice now on this critical issue – before the April 8th deadline!

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