In today’s competitive job market, it’s almost a necessity to have a college degree in order to get a job with a salary that will pay the bills. But while college tuition has increased on a steep curve in the last 20 years, income has not. According to the College Board, tuition and fees at public universities have soared almost 130% over the last 20 years while middle-class incomes have remained flat. This gap is making college out of reach for many families, while others take out loans to cover the skyrocketing costs.
Why has college tuition risen at such a dramatic rate? Of of the main reasons for the steep rise is that State funding to colleges has continually been cut back over the years and colleges have made up for this by raising tuition. In fact, since the Great Recession, more than 95% of states are giving less funding to their colleges, forcing them to raise tuition to cover their costs.
Because of the tuition hikes and the lack of increases in income, families are forced to foot most of the bill and are turning out in droves to borrow money, driving student loan debt in America to a staggering $1.4 trillion. Today, 70% of all bachelor’s degree students graduate with debt, an average of $37,172 per student.
The enormous escalation of student debt is detrimental to the economy. As college grads join the workforce, instead of buying big ticket items (which drive our economic growth) they are busy paying down debt. Many are even putting off major life events like buying a house and starting a family because they have to concentrate on paying down their massive debt by working two jobs or working longer hours.
As a teenager, you may not understand the gravity of paying off your student debt over 10-20 years of your life, and lenders make it easy to start racking up debt. If you must take out student loans, how can you pay off your student loans faster?
Choose the right repayment plan
If you don’t choose, you’ll simply be put on the standard payment plan which spans 10 years. Choose one that will fit your budget. There are even income-driven plans that are based on your earnings. Plans can be changed if your needs change. Be cautious with these, however. While many make your payments lower, they’ll make the life of the loan even longer.
Make payments that are higher than the minimum
As you’re paying for an apartment and amenities, this may be easier said than done, but even a small amount will add up over time.
Start paying right away
Even if you don’t make payments for the first 6 months after you graduate from college, start putting the money aside as soon as you get a job.
Consolidate your student loans
Current rates may be low enough to cut your payments down.
Put any bonus money toward your principle
Work bonuses, inheritances, tax refunds, or any money that isn’t part of your monthly budget should be put toward your debt. If your budget allows, this could include raises as well.
Take a public service job that forgives debt
There are specific requirements, but if you take certain jobs in the public service or medical fields, the government may forgive your debt.
Use the Debt Avalanche strategy
This strategy involves paying the minimum due on all of your loans except the one with the highest rate, on which you pay more. Once that is paid off, you do the same for the next highest rate.
Don’t miss the Student Loan Interest Deduction
The interest that you paid on student loans during the year can usually be deducted on your federal taxes. Be sure to put the extra tax refund toward your student debt!
Pay every two weeks
By dividing your monthly payment in half and paying every two weeks, you’ll make an entire extra payment over the course of a year.
If you’re having trouble paying your loans, https://studentloans.gov may be able to help. You may also consult your lender, but some have come under fire for not adequately consulting borrowers about government help that may be available. If you stop paying your loans, you will only fall deeper into debt so try to avoid this at all costs.
If you or your child is looking at college in the near or distant future, take the time to educate yourself on the various options for saving and paying for college. If borrowing for college is the route you must take, and after graduation you find yourself saddled with debt, stay positive. With some dedication and determination, you can take years off the life of your loans.