How To Settle Student Loan Debt

Graduates leaving college usually have huge student loans to face. Debt settlement is something they don't teach you in school, and the experience can be overwhelming for every fresh graduate. There are steps one can take to make loan repayment more manageable, so if you have student loans to settle, it is advisable to follow some valuable measures.

Find All Your Loans

First, get to the bottom of how much you really owe. Most students go through college with more than one loan, each having a different interest rate. If you have federal student loans, you can check their status online via the National Student Loan Data System. If you took out a loan from a private lender, you can contact then to get your payment information and outstanding balances.

Although most student loan payments are deferred for the first six months following graduation, it is important to find out when you should begin payments so you can plan out your finances once you get a job. In some cases, loans you took out have been sold to another lender, so it pays much to be in constant touch with your student loan company to be on track.

Consider Consolidation

If you have several student loans, it may be a wise decision to consolidate all these into a single loan with just one lender. This is the best way to make debt settlement more manageable, since it can bring down interest rates and make the repayment process easier for you. Student loan consolidation allows you to stretch payments over a longer period of time, so it is easier on your pocket and payment options are quite versatile. Various lenders will be competing to consolidate your loan, and you will be offered discounts or special deals by the best lenders. Loan consolidation also allows you to work on a fixed interest rate rather than deal with variable rates from separate loans.

Prior to having your student loans consolidated, be sure to check if doing so will give you a lower interest rate. SallieMae.com has a calculator tool which can compute information for you and allow you to compare rate discounts between your existing loans and a consolidated one.

Know that once you consolidate your loans, you will be dealing with monthly payments for the next 10 years on the average. So it is equally important to pick out the right repayment plan to suit your situation.

Types of Loan Consolidation

Consolidated loan programs come in 4 basic repayment options: standard, graduated, extended, or income-contingent.

Standard

The standard repayment plan requires you to make fixed monthly payments for up to 10 years while a graduated repayment plan starts off with a low amount, which increased as the years go by. Typically, lower monthly dues can be set for the first 2 to 5 years, and then the amounts increase until the tenth year. This works well since your income gradually increases with the length of employment, but you end up paying more in interest than with a fixed repayment plan.

Extended

The extended repayment plan works just like a fixed plan, although the payment period can be increased to anywhere from 12 to 30 years. Monthly payments are usually lower and more manageable, although you end up paying more in interest throughout the life of your loan.

Income-Contingent

An income-contingent repayment plan considers the borrower’s income, total amount borrowed and the borrower’s living expenses when computing for monthly payments. This type of repayment plan is carried over a maximum of 25 years.

When deciding which repayment option to take, experts advise borrowers to commit to a monthly amount no greater than 15 percent of what they earn. Remember that you have other living expenses to pay for, so choose the option that is most manageable for you. Although it initially appears that the graduated or extended options can suck you out with interest payments, consider that you are safe with the low monthly payments during the start of your employment. And as you move up the career ladder, you will likely begin to earn more. When you do, you can offer to make extra payments on your loans which can be done without penalty and save you more on interest in the long run.

Do your best to settle student loans the earliest. That way, you won’t have problems qualifying for bigger loans you may have to undertake in the future such as taking out a mortgage on a home or borrowing money for your business.

Talk to a Debt Settlement Attorney

If you need help settling student loan debt, or any other types of debt, schedule a consultation with a debt settlement attorney. You will want legal protection from your creditors in the event of a lawsuit.

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