You only have to speak to people who have paid off their student loans to know that being free of this debt can be a huge source of relief. Debt may sometimes weigh heavily on people and knowing that at least one major loan is repaid is a freeing feeling. It’s important to carefully budget and consider your financial situation closely as you determine your repayment plan. Ask yourself these four questions as you start to tackle student debt:
1. How much is the debt?
How much did you take out in student loans? The answer is not the same for everyone. It can depend on the cost of tuition, financial aid, how long you took to complete your degree, and whether you had help from a parent or guardian—perhaps they used part their savings or even tapped into the cash value of their whole life insurance policy, easing the student loan burden. Regardless, now is the time to look at all your loans and interest rates and add up all the debt. Taking stock of the amount of debt you have can also be a good opportunity get a handle on what monthly payments will look like.
2. Do you have other debt?
Not everyone has a mortgage early on in their career, but some people may have credit card debt or personal loans. If you have loans apart from your student loan, the first thing you may want to do is compare the interest rates for each loan. Prioritizing the highest-interest debt (while continuing to make payments on other debt) can be a good idea as it helps minimize the overall interest you incur. In most cases, student loans, particularly federal loans, have lower rates than, say, credit card debt, but this may vary from case to case. If you still have your student loan grace period ahead of you, you may want to utilize those few months to tackle any other high-interest debt you have.
3. Do you have a co-signer?
If you applied for a student loan from a private bank, it’s possible that you may have needed a co-signer to secure the loan. Private lenders usually award loans (including student loans) based on factors like creditworthiness and income. Since many students may not have the credit score or income needed to qualify for the loan, they may enlist a parent or other family member as a co-signer. In such cases, defaulting on the loan can damage the co-signer’s credit score too – so it’s all the more important to make timely payments.
4. What are your refinancing options?
Refinancing simply means that a lender repays your existing loan (or loans) and gives you a new, single loan with different terms. It may sound like a hassle, but under the right circumstances it can reduce your monthly payments as well as help you pay off the loan faster. The determining factor is usually the interest the new lender offers. Your rate may have been high when you applied for the original loan, but it’s possible that you can get a lower rate now which might mean you pay less interest over the life of the loan. For refinancing to work, you’ll likely need to have a good credit score and a good debt-to-income ratio. You may want to shop around to see what kind of rates are available to you.
5. Look into loan forgiveness options
It’s also a good idea to look into your loan forgiveness options. Depending on the type of loan you secured and the industry you work in now, it may be possible to have some federal and even private loans forgiven. For example, Public Service Loan Forgiveness (PSLF) offers support to some borrowers who have worked for certain non-profits or government agencies. Similarly, the Teacher Loan Forgiveness Program benefits teachers who have taught full-time in a low-income elementary or secondary school. Some healthcare workers such as nurses, midwives, or clinical social workers can also apply for student debt forgiveness through the National Health Service Corps (NHSC) Loan Repayment Program.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.
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