Without an advanced degree, it is hard to earn a livable wage. In America, college graduates earn 80 percent more than those who only have a high school diploma. College is more expensive and important than ever before, which puts students in a difficult dilemma. The choice to attend college is accompanied by the risk analysis of getting a degree—students have to consider if their diploma is worth going into serious debt.
Approximately 44 million Americans hold over $1.5 trillion in student loan debt. After graduating, many students find themselves struggling to pay off their debt; over 30 percent of American students default on their loans. While paying off student loans is inherently overwhelming, avoiding common mistakes can put you on the path to financial freedom. Here are some things to avoid and strategies for success when paying off your student loan debt.
Don’t Pay Only the Minimum Payment
If you can, you should always pay more than the minimum payment. In doing so, you will save huge amounts in interest and pay off your loan faster. While the minimum payment is all you’re obligated to pay each month, interest is always accumulating on the principal amount of your loan. When you pay only the minimum amount, your principal loan remains high and can accumulate a big chunk of interest.
Don’t Rely On Student Loan Forgiveness
Many students struggling to pay off their loans apply for federal student loan forgiveness programs. However, if you choose to go this route, it is imperative you research and understand the conditions these programs require. Often, student loan forgiveness programs come with conditions that borrowers miss that make them ineligible for forgiveness. Some of the drawbacks of student loan forgiveness programs include:
- Your loan balance could grow while you wait for forgiveness
- You could receive a big tax bill
- You might wait a long time to receive forgiveness
- Loans from private institutions are not eligible
- Some types of federal student loans are not eligible
Make Lump-Sum Payments
If you have extra money lying around, you should consider making a lump-sum payment on your student loan. A lump-sum payment can be any amount and will help you pay off your loans faster and reduce the amount you’ll pay in interest. Using a raise, bonus, or tax refund to make a large payment on your student loans will put you on the path to financial freedom.
Refinance Your Student Loan
Often, refinancing your student loan is the best way to lower your interest rate and, in doing so, reduce the overall amount you’ll pay for the loan. Whether you have federal or private student loans, refinancing is a great strategy for getting a lower interest rate. Refinancing interest rates can be significantly lower than federal and private student loan interest rates. If you choose to refinance your loan, be sure to apply to research multiple lenders to maximize your chance of getting approved.
Contact a Skilled Student Loan Lawyer
Many students enroll in college with the intention of investing in their future. However, the recessions over the past decade have left many students entering insecure job markets that lack the well-paying jobs they had planned for. As a result, many American students are plagued with the burden of student loan debt.
At McCarthy Law, our attorneys are dedicated to helping students reduce the principal and interest on their student loans. Under our student loan debt settlement program, our licensed attorneys negotiate with lenders to ensure our clients pay only a fraction of their original loan balance. To schedule a consultation with one of our skilled student loan settlement paralegals, call our office at (855) 976-5777 or fill out our online contact form.