Facing the Troubling Realities of Student LoansSeptember 05, 2012 by William Frierson
Student loans are part of getting a college degree for most students. Just this year the student loan debt rate reached one trillion dollars. This astounding fact has led many to question whether or not a college education is still worth it. As long as students follow some rules as they take on college debt and again as they pay off that debt getting a college education is more important than ever.
As students take on debt they should keep in mind that their total debt should not exceed their first year’s salary in their chosen profession; engineers can take on more debt than social workers as engineers have a higher starting salary than social workers. Right now the average student graduating from college has $24,000.00 in debt. The average starting salary for college graduates range from $35,633 for liberal arts major to $59,435 for engineering majors.
Once students graduate they should try to pay off their debt as quickly as possible. Always pay off credit card debt before paying off student loan debt because credit card debt costs more due to the higher interest rate. This also applies to private student loan debt. Most private student loans have a variable interest rate. While the current interest rate may be low this could increase to a much higher rate than federal student loans. So this should be your next priority when paying off debt.
Choose a repayment option you can live with then use an automatic payment option which will typically get you a reduction on your interest rate. Another option is to pay biweekly instead of monthly. When you make biweekly payments you pay an extra month of payments each year. It’s a painless way to make extra payments on your debt.
Anything you have over your living expenses should go towards paying down debt. Don’t forget to take the income tax deduction for your student loan interest. You can then apply any refund to pay down your student loan debt even further.
Finally if you are having trouble finding a job or your payments become too much, consider the income based or income contingent repayment options on your federal student loans. While it may take you longer to pay off your loans and you’ll pay more in interest it will allow you to reduce your monthly payment amount to a more comfortable level.
Maura Kastberg is the Director of Student Services at RSC, Your College Prep Expert, an online college prep program based out of Schenectady, NY.
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