Friday, July 15, 2011

Keep Your Student Loan Debts Under Control -- Know How: A Guest Post by Stewart Smith

Below is my first guest post. Written by Stewart Smith, the post is designed to help students to better understand and cope with their debt problems, an already large and growing problem. Readers of Fubarnomics (and Higher Education and the Common Weal in the India market) will understand why the topic appealed to me.

Keep Your Student Loan Debts under Control -- Know How

A study conducted by the National Center for Education recently stated that the student debts for the graduating class of 2011 are going to exceed the debts of the previous graduating classes. Statistics indicate students will be leaving college with at least $23,000 of debts. It will be an 8% increase from the last year record and a whopping 47% increase from the record over a decade ago. Graduates burdened with large student loan debts usually end up living with their parents longer and get married at a much later age. Why the rising costs? Some say it's the economic meltdown and post recession hangover, while others believe the cost of higher education is increasing because more people are keen to attend college and university now and there is a cutthroat competition for admission and scholarships. With no debt settlement around to help you out, student loan debts can put your finances in jeopardy in the long run. Read on to know how to deal with student loan debts and ensure a financially secure future ahead.

* Make sure you apply for federal student loans to pay tuition fees rather than seeking private loans with high interest. Federal loans have relatively lower interest rates than private ones and their repayment plans can save you big bucks, because you do not accrue interest while you are in school. Most private loan lenders have hidden rules that cause you to pay more fees in the long run if you don't read the fine print carefully.

*Attempt to understand the amount and type of student debt that you owe clearly. Determine exactly how much you have to repay on each loan and how much you will have to pay altogether each month. To gain a deeper comprehension of your financial obligations, visit

*Once you know the amount and type of debt you owe, request the lenders to prolong your repayment duration, if possible. This will enable you to make smaller payments right after school when you are hunting for jobs or as a fresher making less money. It's true that extended payment plans will cause more interest to accrue in the long run but the interest will be tax-deductible within certain limits.

*You can opt for an income-based repayment plan as well. Under this payment plan your monthly payment amount is limited to a specific percentage (depending on the lender) of your discretionary income each month. This certainly helps you to keep current on your payments more easily.

*During a period of unemployment if you are simply unable to make payments, request a forbearance or deferral on your loans. This will temporarily suspend your payments and give you enough time to discuss the repayment procedure with the lenders.

Last but not the least, check your budget, embrace frugal living, curtail entertainment cost, take a part time job and make sure you do not end up incurring a six-figure amount of student loan debts. If you have to spend three to four years focusing on reducing your balance, there will be a delay in achieving your primary goals of life like marriage or buying a home.

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