Americans owe an astounding $1.78 trillion in student loans. And for many people, that debt is downright unmanageable.
How did we get here?
Part of it is that the cost of higher education has risen exponentially through the years, and that's forced borrowers to take on more student loan debt in the course of getting a degree. But part of it also boils down to the fact that many people don't manage the repayment process well.
Image source: Getty Images.
If you want to avoid a scenario where you're overloaded with student loan debt, then here are some essential steps to take.
1. Be careful with how much you borrow in the first place
The less money you borrow to attend college, the easier it will be to pay off your student loans. It's that simple. So unless you have a pressing reason for choosing a private university with a very expensive price tag, stick to a public college -- ideally, one within your state of residence so you can snag a break on tuition and keep your borrowing to a minimum.
You may even want to start off your pursuit of a degree at a community college and transfer to a four-year school once you've knocked out some core requirements. Your tuition there might cost a fraction of what you'd pay elsewhere.
2. Avoid private loans
There's a reason borrowers are commonly advised to stick to federal student loans for college. Not only do federal loans tend to come with a lower interest rate than private loans, but they also offer more borrower protections.
You may, for example, have the option to defer your student loan payments for a period of time should your circumstances warrant it. You'll also have the option to switch your repayment plan if your default option doesn't end up working for you.
3. Steer clear of forbearance
We just talked about the borrower protections federal student loan holders are privy to. But a big reason student loans tend to get out of hand is that borrowers take advantage of the option to pause their payments, not realizing that interest will accrue on their debt all the while.
Tempting as it may be to put your student loans into forbearance, which is an option you might have as a federal student loan borrower, don't. The only exception is if your circumstances are truly dire and you have no other choice.
4. Don't choose an extended repayment plan
The standard repayment plan for federal student loans is 10 years. But you may have the option to get on an extended or income-driven repayment plan that results in lower monthly payments.
That might seem like a good solution for making your debt more manageable from one month to the next. But in reality, it might cause you to rack up more interest on your student loans, making them harder to shed.
Plus, as the name implies, an extended repayment plan has you paying off your debt over a longer time frame. That means you'll bear the mental load of carrying those loans for longer.
It's easy to see why student loans get so unmanageable for many borrowers. Follow these tips to avoid becoming overwhelmed yourself.
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July 19, 2023 at 06:36PM
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