Each and every year sees college graduates leave their respective universities and enter the real world. A significant portion of these graduates start out with student loan debt; in fact, this debt is one of the first forms of debt encountered by the young working population.
Many new employees find that their loans have built considerably over four years, and it is common to have multiple different loans after four years of education. Having many large loans causes plenty of problems for inexperienced debtors. These issues simply add to the already caustic student loan situation which can be described with a number: $1.3 trillion in outstanding debt according to our student loan debt statistics.
With that being said, there are multiple options that are available to newly graduated workers. Here are some popular ways to get a hold of student loans.
Student Loan Refinancing
Refinancing student loans is one of the best ways to save money while simplifying the process with both private and federal loans. It is often easy to do online, and many people can find out if they qualify in a few minutes. This is how refinancing works. A private company takes your loans and buys them out at their current value. They consolidate these loans into one lump sum with one interest rate, and a new repayment plan is offered.
The end result of refinancing is normally hundreds if not thousands of dollars saved in interest over the life of a loan. Many borrowers can qualify for a low interest rate through refinancing, so it makes handling the overall debt much easier and cheaper. It is one of the best options available to qualified borrowers, and it can save someone from getting slammed by a high interest rate on a loan.
Federal Loan Consolidation
Federal loan consolidation helps simplify student loan payments, and they can also provide some initial relief to borrowers. It works similarly to refinancing with a few key differences. When consolidating, all outstanding loans are lumped together to form one loan, and a new weighted interest rate is applied to the lump sum of loans.
Federal loan consolidation offers an initial respite on loan payments. Those who consolidate often get lower monthly payments over a longer repayment period as a result, but there is a catch to this. In most cases, borrowers end up paying more over the life of a consolidated loan as opposed to their original loan situation.
Income Based Repayment Plans
The Income-Based Repayment (IBR) Plan is an option that is rising in popularity with new workers with federal loans. It is simple to understand, and it makes student loans much simpler. This plan takes a certain percentage of a borrower’s salary and applies it to the outstanding student loan balance. After a pre-set time period under an IBR plan, the remaining balance is forgiven by the government. The forgiveness part of this plan makes it especially enticing to graduates. If you do not mind a portion of your salary being taken automatically, then this is the plan for you.
Student Loan Forgiveness
Just about everyone wants to be eligible for student loan forgiveness, but this option is reserved for those who truly need it. There are several scenarios when a borrower can actually consider student loan forgiveness on a federal loan. In the event of extreme circumstances, the federal government may decide to forgive federal student loans; these circumstances include death, disability, or another debilitating factor.
There are other ways to qualify for loan forgiveness; for instance, public servants and teachers are given priority under the forgiveness program which makes them much more likely to qualify.
Author: Jeff Gitlen
Join the LendEDU Newsletter
News, insights, & tips once a weekThanks for submittingPlease Enter a valid email
Student Loan Guides
Student Loan Reviews