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The Six Essential Rules For Managing Student Loan Debt

In the United States, student loan debt has become an enormous problem. In recent years the amount of student loans owed has spiraled out of control. But student debt isn't just a large-scale issue for society as a whole. Paying back student loans is a major practical challenge for millions of individuals. If you are one of those people, it is critical that you manage your student debt properly. Here are six key rules for accomplishing that goal.

Check the terms. Not all loans are the same. Different loans will have different interest rates and rules on making payments. Loans will also have different grace periods. A grace period is the amount of time following graduation you have before payments on a loan are required. Knowing where you stand in regard to each loan is vital to deciding on a plan for dealing with your debt as a whole.
Consider alternative plans or deferments. You may be eligible for certain alternative payment plans, including an extended repayment (which stretches a loan out over a longer time), a graduated repayment (in which payments start off low and slowly increase), or a pay as you earn plan (in which your payments are capped as a percentage of your income). It is also sometimes possible to temporarily defer payments if you are unemployed.
Consider loan consolidation. Loan consolidation is the process of combining multiple loans into one single loan. Loan consolidation has pros and cons. Consolidating student loan debts can reduce monthly payments due and may extend your payoff period. However, consolidating also means the possibility of losing access to loan forgiveness plans and unemployment deferment.
Make payments. Like all debt, student loans cannot be ignored. You must make regular payments. If you do not, the consequences may be severe. Your credit score will be impacted. Late fees will put you into an even bigger hole. Ultimately, the government can start garnishing your wages and Social Security benefits. Since (unlike other debt) student loan debts may be dischargeable in bankruptcy in certain cases. Keeping up with payments is an absolute necessity.
Pay more costly loans off first. Getting rid of loans with higher interest rates first is common sense. While you should always make minimum payments for each loan every month, any payments past that total should go to whichever loan has the highest interest rate. Once that loan is discharged, apply the amount previously paid on that loan to the loan with the second highest interest rate.
Consider loan forgiveness. Loan forgiveness programs are exactly what they sound like. However, you aren't just handed the option of having your debt canceled. One federal program forgives debt after ten years of payments for those who work for the government or a nonprofit. Other programs exist for people who work in poor or rural areas in medicine or another critical profession.

Student debt can be an enormous burden. Besides the more obvious financial difficulties, student debt can reap a serious psychological toll, dramatically increasing anxiety and stress. If you have student debt you simply must make managing it properly one of your top priorities.

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