5 tips for managing student loans in Florida
People who can wisely manage student loans may be able to avoid running into severe debt issues.
A January 2016 report from Time magazine paints a bleak picture of the student loan debt crisis. According to the article, approximately 16.7 percent of students graduating now have excessive debt. What’s more, of the students who borrow any money at all, 27.2 percent have debt that is excessive.
Fortunately, there are ways to successfully manage loans and eliminate debt in extreme circumstances. People in Florida who borrowed money for education should heed these following tips:
1. Understand the loan terms
One of the most important items any borrower can do is to understand the terms of his or her loan. Knowing whether the loan is private or federal is important, because certain programs apply only to government loans. Additionally, a borrower should always know the balance and when and how to make payments.
2. Choose an appropriate repayment option
As the U.S. Department of Education points out, most loans are typically structured around a 10-year repayment plan. However, borrowers are able to extend this timeframe, which would lower the monthly payment but increase the amount of money owed in interest. There are also some repayment plans that are based on how much income the borrower has. This can ensure that the person owes only a reasonable amount every month. Many private loans do not carry this option.
3. Prioritize loans
It is common for someone to carry more than one type of student loan. Under these circumstances, it may be important to prioritize which one will be paid down first. Targeting the one with the highest interest rate is generally the recommendation. Private loans generally fit this description and also tend to lack the flexibility in repayment options that federal loans offer.
4. Make overpayments when possible
Some people find themselves in a position to make some prepayments, either regularly or once in a while. In either case, this can be helpful to pay down the loan and lower the amount of interest owed over the life of the loan. It is important to make sure the lender knows that the extra payment will go toward the principal.
5. Get help when necessary
Student loans should not be ignored. Defaulting on a loan can do serious damage to someone’s credit score because the total balance on the loan will become due immediately. When this happens on a federal loan, the government can seize the borrower’s tax refunds and garnish wages.
Someone in danger of default or delinquency should immediately contact the lender. It may be possible to extend the deadline for payment or negotiate another plan. In extreme cases, it may be wise to seek bankruptcy, as people who can prove undue hardship could receive a discharge for student loan debt.
People who have concerns about student loan debt should speak with a bankruptcy attorney in Florida.