While obtaining a college degree can make a person earn much more than their non-degree-holding counterparts, completing college education without debt has become nearly impossible. In fact, the total student debt in the US has skyrocketed passing $1 trillion while the number of students obtaining loans to attend public schools have risen from 46 percent in 1992 to 62 percent in 2008.
With economic downturn affecting the earnings of most households, it is possible for students to fall victim to the rising college debt unless appropriate debt management strategies are planned and adapted well in advance. Therefore, this article will discuss some of the strategies to pay off college debt along with some innovative strategies which may come in handy in certain instances.
-Find a part time job
Finding a part-time job while studying may be a good way to save the loan money and find alternative ways of paying extra costs that are incurred during the study period. If lucky, these students would be able to earn some extra cash; and if saved, it cushions the first few months of the loan repayment, or sometimes relieve the student from his or her entire college debt.
-Budget the expenses during college education
Listing out the expenses including the potential expenses in the future would enable a student to avoid most of the unnecessary expenses and to save on some of the other expenses. It also helps students to plan alternative ways of meeting up with the requirements without having to rely on the loan money. The savings made through budgeting should be kept in a savings account and should only be used when repaying the loan.
-Opt for bi-weekly payments rather than monthly payments
Given the relatively low interest that has to be paid when considering the total loan amount, it is advisable to undertake bi-weekly loan repayment than a monthly installment. In general, such payment plans could lessen the amount of loan that has to be paid by few months at the end of the loan period.
-Apply for student loan tax deduction
By applying for a tax deduction, which amounts to a percentage of the interest paid for the student loan, sometimes it is possible to wipe off at least a year from the student loan repayment schedule. Often, students are eligible to receive a 25 percent tax refund on the interest paid at the end of the year and in case of a $2,500 interest, the minimum amount of savings would be around $600 for the same year.
-Pay the high-interest debt first
In case of credit card debt and student loan debt existing together, a student should opt to pay off the debt with high interest, such as the credit cards, prior to completing the repayment of the student loan.
-Pay extra when possible
Paying an extra amount to reduce the principle could save hundreds if not thousands of dollars over the years on a student’s loan. The reason being that the calculation of interest for even a small amount would be done for the entire loan period and when added-up, this could become a considerable amount of money. Thus, paying even extra five or ten dollars can make a difference in the final count.
Apart from the above methods of easing college debt early, registering for loan auto-pay schemes is also an option. These often carry a significantly lower interest rate. At the same time, public service also forgives a certain percentage of the college debt after few years of service or registering for a free degree. This makes the student debt free at the end of the study period, and is included among some other alternatives to minimize or prevent accumulation of college debt.