The Divas are home from our weekend in New Rochelle, NY. We presented a Debt Free for Life seminar for the Westchester Young Adult Conference hosted by Shiloh Baptist Church. This second annual conference focused on relationship building and economic empowerment in the Westchester County community. O yeah! Two areas of need in many urban communities across this country.
The seminar touched on a variety of ways we become consumed by debt, the Divas’ tried and true strategy for eliminating debt, and tips for successfully managing your household budget. However, a reoccurring theme during the Q&A period centered on student loan debt. Quite a few conference attendees, like many of us, have or will be dealing with heart burn related to repaying massive student loans. Inquiring minds want to know – what can I do to pay off my student loans?
Like any debt, student loans do not amass overnight and repaying them will take time. Absent any financial miracles (not saying they can’t happen), take it one step at a time. We advocate the following:
It may be tempting to bury your head and ignore student loans. Bad idea. Student loans are one of a handful of loan types that can not be discharged in bankruptcy. The government backed collection agency has the authority to add 20% in penalties to loan defaults and chase you with almost limitless powers. Any professional licenses can be suspended, your paychecks can be garnished – without a court order, and your social security checks will also be garnished (if you default into retirement). Uncle Sam does not play when it comes to taxes; now add student loans to the list. Remember, the 2006 bankruptcy laws were changed to exclude private student loans from the list of discharable debts as well.
Federally backed student loans generally offer a plethora of hardship assistance options. A forbearance puts the breaks on student loan payments for one year. These are easy to get, just request them online through the loan servicer’s web site. Interest does accrue, but you can use the extra time to make any financial adjustments. Make sure you use the time wisely and pay down and/or off any other debts or work to increase your income.
Deferments can be granted based on documented hardship circumstances (i.e. job loss) or at least part-time enrollment in a degree seeking program. There is an approval process with this option, but the interest is subsidized and does not add to your balance during the deferment period.
Graduated repayment plans. This option is attractive for people whose income is steady, but not yet fabulous! Recent graduates may especially want to consider this option. The loan servicer can reduce your initial payments and step up the payment amount to “hopefully” coincide with an increase in income as time passes.
It is very tempting to max out on lifestyle choices once the steady paychecks roll in. The latest gadgets, new clothes, a fly ride, apartments in the high rent district, and my favorite…TRAVEL all seem like well deserved, post-college treats. Making the lifestyle sacrifices early on will afford you the budgetary room to attack those student loans with passion. Try living with family or a roomie, keep your old working cell phone, and cut back on nonessentials so you can aggressively pay more than the minimums before mortgages, marriages, and mayhem…in other words life…catch up with you. Your future self will thank you!
Depending on your state and chosen occupation, you may qualify for a loan forgiveness grants. These tend to apply to those who enter public service (teachers, police officers, or federal employees) or some type volunteer service commitment. Teachers will generally be place in a rural or inner city location. However, if you can give a few years to an underserved population to have a significant chunk of your loan forgiven, it might be worth your while. Check your state website for more information.
With any loans, you’ll need to exercise patience, persistence, perseverance and a whole lot of prayer. Believe me, it’s definitely worth the effort. Since the best defense is a great offense, next I will explore ways to avoid student loans all together.