(LoanSafe.org) – With tuition rates on the rise across the country, students are taking on multiple loans in hopes of paying them back while undergoing courses, or when they finish college and land a job in their field. In today’s economy, students are finding it very difficult to make their way through college without having to acquire various forms of financing to pay for a college education.
There are several types of student loans available including, federal loans provided by the government, private loans from a local bank or student loan company, and loans that are given out by the schools’ themselves. Combinations of these loans are being taken on to pay for the rising costs of an education. Juggling multiple student loan accounts can be frustrating for anyone, and good luck paying them back if you’re unable to secure a full-time job after graduation.
Recent studies have shown that nearly half off all student loan borrowers have loans in “deferred status,” meaning the student has chosen to delay repayment on the loans. Not only has the number of deferred loans skyrocketed over recent years, the actual amount owed by each student has dramatically increased as well. According to Transunion, the average loan debt among college graduates is $28,829, nearly a 30% increase in the last five years.
Tips to pay back multiple student loans
– Start with the basic step of analyzing your financial situation. Some people do this on an annual basis, but trying to juggle planning and working is often difficult for anyone. Sitting down and planning for your financial future is a vital step for any student, no matter what your circumstance may be. You must know the exact interest rate and monthly payment of each debt plan, and then total up the amount of all your loans and monthly payments. Not knowing where you stand will only lead you into further debt and may negatively impact your credit score if you are unable to make payments accordingly.
– Loan consolidation can be a good option for student loans. This process consists of two or more loans that are combined into one payment option. Start out at the source (i.e. your school), and ask your financial adviser if you’re eligible for any state, federal or private consolidation programs. The beauty of consolidation programs is that they leave you with less payments you need to make each month. Often times, it even helps to reduce your interest rates by combining multiple loans into one low monthly payment. Not all loans are eligible for consolidation. However, compacting at least two – three loans out of five may make you feel less overwhelmed. If you’ve only acquired a couple of student loans, your problem may be fixed by consolidating.
– If you’re only able to pay one out of your multiple loans while you are in college, start with the one with the smallest loan balance. Some people may feel it’s wiser to start paying a loan which may have a higher interest rate, but paying off a smaller loan first may boost confidence for some. It all depends on what your overall goals are.
– For students who want more manageable payment plans, and who can handle the extra interest that will accumulate, may want to extend the term of the loan. 20-year and 30-year loans do compile far more interest over the course of the loan due to the extended time frames compared to a typical 10-year loan. However, the payment plan will decrease the monthly amount owed and will make the payment much more manageable.
– The Income-Based Repayment Program (IBR Program), is an option for students who are struggling with their student loan debt. Using the IBR program allows a borrower to repay his or her federal loans at their own pace. It permits them to only pay what’s affordable to them. Monthly payments can be capped up to 15% of your discretionary income.