Students today are graduating with an average student debt of over $30,000. Incurring this much debt at an early age compromises their financial future. And as expected, many are struggling to repay their loans. According to the Wall Street Journal, over 7 million out of the 44 million borrowers are behind on their payments.

Even worse, the national student loan debt has grown to over $1 trillion. With such a big burden on their shoulders, borrowers must manage their loans with caution if they are to get out of debt. Students must also avoid making the eight following mistakes with their loans.

1) Using Outdated Contact Information

Students must inform their loan servicer if they change their phone number, address, or campus. Those who fail to do so cut themselves off from any help the servicer might offer. Considering that servicers update contact information for free, there is no reason for one not to do so.

2) Paying to Have Student Loans Reduced

Any calls, letters, or social media ads which promise to reduce one’s payments or offer loan forgiveness are fraudulent. The US Department of Education and loan servicers offer these services for free.

3) Not Having a Repayment Plan

Repayment plans determine one’s monthly payment as well as the repayment period, and there are two of them. The first is the standard 10-year plan which features high monthly payments and a low interest rate. Although it takes a greater portion of one’s monthly income, it allows one to pay off the loan quickly. The second allows for lower payments and a longer repayment period of up to 25 years, but it attracts higher interest. Anyone who fails to choose a repayment plan is automatically placed on the standard one.

4) Not Consolidating your Loans

After realizing that one is on the wrong repayment plan, one should take action immediately. By consolidating the loans, moving to a better plan, and applying for loan forgiveness, one can ease the burden of student loans considerably.

5) Not Signing up for Automatic Payments

Forgetting to pay one’s student loan only to end up behind on payments or in default is easy. To prevent this from happening, one should sign up for automatic payments through one’s loan servicer. The payments are not only deducted from one’s bank account automatically, they also attract a 0.25% interest reduction.

6) Not Paying More When Possible

Since interest paid on any loan increases with time, reducing the repayment period reduces the total cost of the loan. This is possible if one pays extra whenever possible.

7) Making Late Payments of Defaulting

Late payments or defaulting on a student loan lowers one’s credit score which makes getting loans in the future harder. Defaulters can even have their tax refunds withheld. Anyone unable to make payments in time should contact a loan servicer about reducing or postponing them.

8) Not Considering Online Courses

Making payments is easier if one earns a higher income and getting an online degree is one way of doing this. They are affordable and can be pursued at one’s pace. For instance, with an online doctor of education degree from an institution such as Maryville University, an educator can apply to work as a dean at a college or university. Deans are well paid and with the higher salary, one can pay off a student loan faster.

Conclusion

Paying off a student loan is hard but not impossible. By avoiding simple mistakes such as failing to have a repayment plan, keeping one’s contact information updated, or making payments in time to name a few, one can fast-track the road to being free from debt.

We welcome your feedback to our work.

Email:  General Information   |   Prof. David C. Pecoraro

Thank you!

Daniel & David

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      8 Common Mistakes Students Make with Student Loans