The most recent graduates of 2016 finished college with an average of over $37,000 in debt. When you’re just starting down your career path, that’s a massive debt.
Since bankruptcy is not a solution for student loans and lenders can garnish your wages, your best bet is to be diligent about paying them down. Here are some tips to help you out.
Income-Driven Repayment Plans
IDR plans lower monthly payments on qualifying federal loans to 10-20 percent of your income until they are eventually forgiven after 20-25 years. There are tax implications, however. When the rest of your debt is forgiven, you must claim that amount as income for the year and pay taxes on it.
It’s best to only use an IDR plan if you are unable to make your monthly payments and risk default or severe penalties. As a matter of fact, IDRs are best used as a short-term stopgap.
Some large companies offer employees help with student loan repayments. It’s worth looking into. And if you have yet to rack up student debt, check with your employer to see if they offer any tuition reimbursement plans.
Public Service Loan Forgiveness
Some career paths offer repayment or forgiveness for student loans. Specifically, if you are pursuing a career in education, law, nonprofit or government sectors.
Your balance will be forgiven if you make 10 years of on-time payments through a federal income-driven repayment plan.
Out of sight, out of mind. And some lenders will even reduce the interest rate by a small amount if you set up automatic billing.
Like a mortgage bill, it is beneficial to pay more than the minimum amount each month. This will help reduce the amount of interest you pay in the long term. You can also make extra payments occasionally to the same effect.