This weekend, the challenge focuses on doing something proactive to get rid of your student loans. Many people do not even lump their student loan debt into the entire amount of debt that they owe. Although your student loan debt may be low on your debt payment list, you can still do things now to help combat your student loan debt. Depending on your interest rate and the amount you owe on the loan, you may even put this debt last. Still there are things you can do to clear up your student loan debt more quickly.
Before President Obama made all government student loans through the Federal Direct Loan program, you may have taken out student loans through one or more different banks or financial institutions. You may benefit from consolidating your student loans into one Federal Direct Loan. This will lock in the current interest rate, but it will also make you eligible for the student loan forgiveness programs that are out there. If your loan is not through this program, you will not qualify for loan forgiveness. If you have already consolidated your loans, you may want to transfer the loan into a Direct Federal Loan, if you know that you will qualify for a loan forgiveness program. This can be a difficult decision, especially if your current interest rate is lower than the rate offered by the government.
You should see if you qualify for a student loan forgiveness program. You may qualify to have your loan forgiven after five years of teaching. If you are a public employee, you may qualify for student loan forgiveness after ten years of services. If you qualify for income-based payments, you can have the remainder of your loan forgiven after twenty-five years. The time of service starts after you transfer your loan to a direct loan, and your previous time does not count. So if you have been working as public employee for seven years and you transfer the loan over now, you will still need to wait ten years to have the remainder forgiven. Additionally, you need to stay current on the loan to qualify.
If you are having a difficult time making your monthly student loan payments, you should see if you qualify for income based payments. This is something you will need to reapply for every year, since the payments are based on your income. You do need to do this through the direct loan program, but it may help you when you first start working or you are getting a business on its feet. After twenty-five years of on-time payments you can have the remaining balance forgiven.
Many people look at the student loan interest deduction and the relatively low interest rates and wonder why they should pay off their loans early. The tax deduction is not the entire amount that you pay on the loan each month. You can earn a similar deduction if you give away about the same amount each year to a charitable donation. Additionally, think of that money as your money that you could invest or spend on things you want in your life. If you are proactive about paying off your student loans, you can have that much more extra wiggle room in your budget.
Finally, your private student loans should be a priority and up higher in your debt payment list. They do not have the same tax benefits as government backed student loans. The interest rates tend to be higher, and you will not have the same flexibility in having the payments put on forbearance when you lose your job. The sooner you can pay off your student loans. The better off you will be financially.