Don't Get Swamped By Student Loan
Debt!
Are you or someone in your family facing heavy
student loan debt? Recent graduates left college with an average of $19,646
in student loan obligations, according to a study by the Project on Student
Debt. That was up 8% from a year earlier, while average starting salaries
rose only 4% from the previous year, the study found. That means the debt
that graduates are carrying is growing faster than their initial chances to
earn the money to repay it.
There’s no reason to despair, though, according to
the Iowa Society of Certified Public Accountants, because there are several
steps that you can follow to manage weighty student debt.
Lower your payments
If your monthly loan costs are simply too much, one simple and immediate
solution is to reduce them by finding out if you can lengthen the amount of
time you have to pay the loan–from 10 years to 20 years, for example. You
should be aware that extending the loan term means that you will end up
paying more interest over time, but lowering the monthly payment amount may
be your top priority right now. Remember, that you can always increase your
monthly payments later–and thereby shorten the length of the loan–if your
financial situation improves in the future.
Consider consolidation
Students often sign up for a number of different loans to finance their
education. That may mean you end up writing several checks to different
lenders at various points in the month. When you consolidate, you take out a
new loan that is equal to your total debt and use it to pay off all your
existing balances. You then can pay just one student loan bill each month.
That will make life easier, but it may not necessarily lower your overall
monthly outlay, depending on the new loan terms. If you do find a
consolidation loan that will reduce your monthly payments, make sure to
examine the loan terms carefully. And remember that if you will be paying
off the consolidation loan over a longer period, the loan will cost you more
in the end, so it may not be the best choice.
Do well by doing good
Do you wish you could make a difference in the world? It’s possible to
cancel some or all of your federal student loan balance by signing up for
any one of a number of programs aimed at making positive change. For
example, teaching in an elementary or secondary school in a low-income area
can reduce some federal loan totals, while serving a two-year term in the
Peace Corps can also lead to a reduction in your loan balance. Volunteers
for AmeriCorps and VISTA may qualify to postpone loan payments while they
are involved in the program and receive stipends that can be used to pay
down student loan debt. Health professionals who spend two years working
with the National Health Service Corps serving communities that have a
shortage of medical help can qualify for loan forgiveness of up to $25,000 a
year. In addition, many law schools have loan forgiveness programs for newly
minted attorneys who take jobs in public interest law. If you have a strong
interest in making a difference, then that commitment can also help you
relieve some of your student loan obligations.
Ask a CPA
Whether you are seeking to reduce your regular payments or manage your
overall student debt obligation, your local CPA can provide advice on the
best way to accomplish your goals. Consult him or her about smart ways to
handle your debt or about any of your other financial questions. To access “Find a CPA” on the web, go to
www.findanIowaCPA.com.
