Many graduates are worrying about student debt, and with good reason. In 2006, U.S. student loan debt hovered around $600 billion; today, that number has skyrocketed to $1.3 trillion. On one hand, that isn't a bad thing - it means more Americans are going to college. But, the debt is becoming unmanageable for many graduates.
Here are strategies you can use to make your student loan experience a success.
Before Attending:
You Need a Strategy
Create a strategy early, so that you have longer to save. If you're already late, don't pull from other savings like your retirement fund. Parents: never forgo saving for retirement to build up a college fund. Students have many available resources to pay for education, but you can't get a loan to retire.
Wisconsin College Savings Program
Have you heard of the Wisconsin College Savings Program? It's a great way to save if you're starting early. Made up of the 529 EdVest and Tomorrow's Scholar college savings plans, it enables you to save tax-free for future education costs. You can find more about the program here: www.statetreasury.wisconsin.gov.
Scholarships/Grants
Every strategy should include applying for grants and scholarships. National grants include:
- Pell Grants
- Academic Competitiveness Grants
- National SMART Grants
Often though, local scholarships have less competition (such as Peoples State Bank's scholarships). Check with civic organizations and religious institutions for available aid also. Don't forget to ask the school itself about maximizing their financial aid package. If you've been accepted to several schools, try to negotiate for an even better package.
Loans
Federal loans, whether subsidized or not, are usually the better option. They are often cheaper with flexible repayment options. Students with financial need should check into their federal options first. The Consumer Financial Protection Bureau has more information available: www.consumerfinance.gov/paying-for-college. The most important thing to remember when applying for loans is to know how much you need. Having this defined will help stop you from taking on more debt than needed.
After Graduating:
Organize
Organize all the information you have for your student loans. Make a list or spreadsheet that with important information such as:
- the name of the loan
- the lender
- interest rate
- total principal (amount due)
- monthly payment
- when repayment begins
The first payment may be due at different times for different loans.
Communicate with your Lender
After college, many people move. You want your lenders to know how to reach you! Update your contact info whenever changes occur. Staying in touch is also wise in case you start having difficulty making your payments. (Due to unemployment, injury, medical condition, or other financial emergency.) Lenders will work with you to adjust your payments or schedule, but you have to let them know first.
Consolidating?
A consolidation loan combines several loans into one. You get a single monthly payment and fixed interest rate. There are pros and cons. Consolidating often extends the repayment period. Meaning while you enjoy a lower monthly payment, it will take you longer to pay off the loan. It can often provide an interest rate break (especially if you have any variable rate loans). And, one payment is more convenient to budget for. Seek expert advice if you're considering consolidation as a strategy.
Tax Breaks
The Student Loan Interest Deduction allows taxpayers to deduct up to $2,500 of the interest paid on student loans (depending on your income). Even if you do not itemize your taxes, you're should claim this deduction. Watch for your 1040 form(s) to arrive - you'll receive one per lender - and follow the instructions on them.
