Dealing with Student Loan Debt

As the saying goes, there’s little point in crying over spilled milk. If you’ve found yourself saddled with a mountain of student loan debt that has now spilled over into your life and peace of mind it is time to move forward with a plan of action. Because of a 2005 law you cannot write off student loan debts except in very rare cases, so it is up to you to figure out a solution to pay off these debts while maintaining a comfortable lifestyle.

Update Your Mindset

You may feel discouraged and angry about your student loan debt load. You may feel that you’ve been bamboozled by school advisors, financial aid officers and even loved ones who told you that taking out college loans was normal and worthwhile. Get all of that anger out of your system in a productive way and change your mindset starting today. The debt is here, so now you have to manage it to the best of your ability.

Also, while you may not be able to wave a wand and make your own debt disappear you can pay a younger person a favor by advising them of your situation and how they can avoid taking out so many loans. You can also call your state representative and support petitions to help young people who are dealing with overwhelming student loan debt.

Get on a Graduated Plan

If cash flow is an issue, call your lender to inquire about a plan to make a low payment today that gradually increases with time. In many cases you make an interest-only payment. With a low monthly payment now you have time to build your career and to work on increasing your income in the future. When the monthly payment amount does rise after a few years you might be in a better position to afford it. However, before you opt for a graduated payoff plan consult the lender to find out how this will affect the total amount of interest you’ll pay over the course of the loan.

Aggressive Payoff Commitment

If you have sufficient income and cannot stand the idea of making a student loan payment for 20 to 30 years commit to an aggressive payoff plan. Send extra money with your regular payment each month and tell the lender to apply it to your principal balance. Depending on how much extra you pay each month you could slash the duration of your loan to just a few years instead of multiple decades.

Dealing with student loan debt is stressful, but instead of running away from the problem it’s best to face it head on. Be proactive and communicate with your lender to find a solution.

Resources:

http://www.huffingtonpost.com/2012/08/14/private-student-loans-bankruptcy-law_n_1753462.html

http://www.asa.org/repay/options/graduated/default.aspx