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Starting off Right: Getting Rid of Student Loans

By Shaakirah Medford on 05/18/2017 @ 03:25 PM

Tags: Financial Capability

For many, student loans are the daunting after effect that looms over your head once the euphoria of surviving the past four years of all-nighters, midterms, finals and thesis presentations have worn off. In 2014, CFED’s Assets & Opportunity Scorecard reported a national average of $27, 022 worth of debt for students graduating with an undergraduate degree. With loving the idea of traveling, buying a home sooner rather than later and being able to develop a comfortable lifestyle, I have been putting more thought into getting rid of my student loans ASAP (preferably in less than the anticipated 10 years). With this new found goal in mind, I wrote it down and started researching.

Start Sooner, Finish Quicker

While in college, paying off my student loans was literally the last thing on my mind. However, looking back I realized that any little bit that I could’ve paid towards my loans while still in school would’ve helped a lot. Unexpected refund checks from my bursar’s office and even tax return checks are perfect examples. If a student receives a refund check, it is due to your school account having more money than necessary to pay the balance that was due. Whether it be from financial aid, scholarships, student loans and cash payments, you had more than enough money and the check refunds you the excess. Due to the low maintenance lifestyle you live as a college kid, getting an unexpected check is like a second Christmas, but if it is not needed for expenses pertaining to school or emergencies elsewhere, then those funds would be perfect for paying off interest and paying down on the principal of your brand new student loans. Tax Returns can work in the same way.

VITA

Speaking of tax returns, one major piece of information I just was not educated on during my time in college, was the opportunity tom get my taxes filed for free. Volunteer Income Tax Assistance (VITA) is a program which offers free tax filing assistance to low-income individuals. This opportunity is great for college students because not only are you able to save money, but the money that you do save and a portion or all your tax return can be put towards your student loans. VITA volunteers can also teach you how to file taxes for yourself, you can become a volunteer and definitely build your resume.

Be Informed

While you are in school, it is the best time and place to increase your knowledge about money management. Take a class or two on finances and even investments. Knowing and truly understanding how to manage and multiply your money are great assets to building your wealth, paying off your loans in the most effective way and developing better spending habits.

Visit your financial aid office: Your financial aid and bursar’s office on campus is filled with professionals who know how your money is being used and what you should do to be in great financial standing with your loans. Ask questions. Ask a lot of questions. They are there for you and you should fully take advantage of being educated by them.

Speak to your loan servicer and stay up to date: Even if you haven’t graduated from college yet, it will only help you to stay in contact with your loan servicer. Make sure that you know how much money you have in loans, the amount of interest attached to each loan, your expected paid-in-full date for each repayment plan and what it will take for you to be on the right track for achieving your personal repayment goals.

In 2012, CFED’s Scorecard reported a national average of 11.8% of students defaulted on their loans. Defaulting not only negatively impacts your credit score, but it makes it harder for other lenders to believe that you are trustworthy enough to be given another loan, whether it be for a mortgage, a car, small business, etc. The Consumer Financial Protection Bureau (CFPB) is suing Navient (a student loan-provider) for not sharing with borrowers the necessary information they needed in order to take the best and most affordable actions in regards to paying off their loans and avoiding outcomes such as defaulting. Learn the difference between income-based and standard payments, forbearance and deferment. Become educated on your loans and have your loan servicer on speed dial if you need to but always be in the know about the money attached to your name.

Tricks

Automatic payments: Depending on your servicer, you can save up to 25% on your payments when you sign up for automatic payments and it is also one less thing you will have to worry about.

Bi-weekly payments: I found out that by splitting your payment in half and paying it every two weeks to your account before your due date, it helps you to save money and you can deduct at least a couple hundred dollars from your loan. However, this only works if you are assigned to the standard payment plan.

Keep your goals visible. I am a firm believer that any goal you do not write down is not a real goal, it is just wishful thinking. Write down your goals, create a vision board, tell a friend and have them hold you accountable, do whatever it is that you need to do in order to make sure you achieve the goal you set out to achieve. Get rid of your loans and finally move on to traveling, buying a home, go back to school without building on top of your old debt, set up things to retire a little earlier and live the life you want to live.

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