For young professionals, student loan debt can seem like an extremely large and daunting sum of money to repay when their entire starting annual salaries are often barely more than what they owe. The effects of student loan debt can lead to financial uncertainty. Learning how to reduce student loan debt can be a valuable skill.
December 3, 2020 in Learn
Getting a post-secondary education only happens with a lot of resource dedication, including time and money. As you continue to complete more education, the likelihood that you will graduate with more debt increases.
Trying to budget on a limited income can be tough, but it’s important to do. While you’re receiving your student loans, you should be budgeting using the amounts received as part of your income. Once graduated, your repayment should be budgeted as a fixed expense that is paid on a monthly basis. The best way to ensure that you are making these payments is by setting up an automatic payment so that you don’t forget to make your monthly payment.
There are many ways that you can look to pay down your debt faster. Using an individual method or a mix of these methods can help you become debt free faster.
Knowing exactly what you owe is the first step. Understanding the balance, the payment terms, and the interest rate will allow you to see just how long you have to pay back your loan and the minimum amount you will need to pay on a monthly basis
There may be a grace period for government loans. This can vary by province or federally, depending on the loan you have. In addition, there is the possibility to extend the grace period if you aren’t making enough money to make the minimum payment. Knowing exactly when you need to start making payments is a great way to set yourself up financially for the year.
There are certain situations where you may qualify for student loan forgiveness. These programs may be available to different grads, such as doctors or nurses, and may differ federally and provincially. In addition to forgiveness, there also are programs that can help you reduce your monthly payments federally.
If you are unable to make the payments because they are too much of a financial burden, it is best to get ahead of the situation as early as possible. Contact the loan issuer and discuss the options that are available to you. You may be able to lower your interest rate, decrease your monthly payments, or defer your payments for a specific period of time.
If you have multiple different types of student loans, you may want to consider consolidating them into one loan, especially if some of the loans you have hold a higher interest rate. Refinancing your loan can be beneficial if the total cost and interest are going to be lower in the long run. One way to consolidate your debt is through American Express Personal Loans, which is available to pre-approved Cardmembers.
If you find yourself in a position where you cannot meet your student loan obligations, there are several downsides. The first is the possible impact on your credit score. Late payments are recorded on a monthly basis which is why it is important to make your payments on time. This is something you want to avoid as collections can go after you, you can be taken to court, and your income tax return can be seized. It’s best to speak with your lender to iron out a lower payment plan if you find yourself in this position.
Depending on the loan, you may be able to use a credit card to make payments. If this is the case, you may be able to receive rewards or cash back on these payments. If you plan on making student loan payments on your credit card, you should investigate the associated fees. You also should ensure that you are paying your credit card off in full.
If you have an American Express Card that is eligible for the Membership Rewards® program, you may be able to redeem your points for HigherEdPoints gift certificates that can be used towards tuition and student loans.
Using a credit card as a student and graduate can help build your credit score, but if you have debt you might not want to add annual fees to your debt. Finding a no fee annual credit card is a good option for graduating on a budget.