Student Loan Debt
You are probably close friends [or enemies] with student loans if you’ve hit that 4th year, 5th year…or maybe 6th year of college. Unlike Vegas, what happens at college often stays with you for over 10 years – not ideal.
So, what’s worse than graduating with the average student loan debt of ~$30,000? Answer: paying an additional $5,000-$10,000 of student loan interest. Here’s how you avoid this…
(1) Determine your student loan type: federal, private, direct, indirect, etc.
(2) Understand your student loan benefits! Be careful not to consolidate before you consider your options and the pros/cons. Consolidating federal and private loans with a private loan company may result in a loss of your benefits (repayment options, forgiveness, hardship, etc.).
Public Service Loan Forgiveness: after 120 qualifying monthly payments, your leftover debt may be forgiven. To quality, you must work full-time for:
-Government organizations (federal/state/local/tribal)
-Not-for-profit organization, Section 501(c)(3)
-Other types of not-for-profits (Peace Corps, AmeriCorps…)
**Student loan forgiveness is treated like taxable income: $50,000 forgiven means you will pay taxes on “$50,000 of additional income”. Say your tax bracket is 20%, then you’d owe $10,000.
No student loan benefits? Consider consolidation: combining multiple loans into one.
Pros: One bill is likely easier to manage. And, if you’ve improved your credit, you may receive a better interest rate (can save you thousands of dollars in interest). More about how much you will actually pay on your student loans here.
Cons: Loss of benefits, mentioned above. Beware of “lower” payments – if you’re being offered lower monthly payments, you’ll want to verify that you’re NOT extending the term of the loan. Typically, the longer your loan term, the more you’ll pay in interest.