How To Fight Back Against Student Loan Debt

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Without a doubt, if older Americans could send a message to new high school graduates, it would be this: Do whatever you can to stay out of student loan debt.

Student loan debt in the United States reached $ 1.59 trillion on March 21, 2021, the U.S. Department of Education reported. That is 42.9 million borrowers, and 90% of the loans are covered by the federal government.

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The highest average outstanding debt among borrowers is among those aged 50 to 61, according to Bloomberg. They have an average balance of $ 43,400 on loans they took out for retraining after the Great Recession of 2008, loans to support their children and, in some cases, for their first studies. And carrying such debts puts them in financial trouble as their careers should come to an end, affecting their retirement.

However, it is possible to get out of student loan debt and not let it ruin your financial future. If you are struggling with payments or find that student loan debt is preventing you from meeting your financial goals, read on. And if you are just starting your road to college, get some borrowing tip.

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change job position

Even if you love your job, finding a new job can help reduce your student loan debt. Because many employers, especially larger ones, offer help with loan repayment as a discount. And since the pandemic, the benefits have gotten even better. Under the CARES Act, passed in 2020, employers can pay up to $ 5,250 in student loans for an employee in one year. This money is tax-free for the employee and wage tax-free for the company. The program was extended until the end of 2025.

Even smaller employers are finding ways to help workers pay off the loan by making a fixed contribution to the debt or even allowing them to convert their paid time into cash to pay off the student loan.

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Change your payment method

If you’re paying $ 500 a month on your loan balance, keep doing it – just change the way you pay. By paying every two weeks instead of once a month, you make 26 payments per year or the equivalent of 13 months instead of the usual 12. You save interest and reduce the loan without noticeably increasing the amount out of your pocket.

Investigate public sector loan forgiveness

Borrowers who work for a federal, state, local, or tribal government, or for a qualified nonprofit, who have a federally sponsored loan, may be eligible for the Public Service Loan Program. The balance of the loan can be canceled after making 120 monthly payments while working for a qualified employer. To date, the program and its spin-offs have wiped $ 583 million in federal student loans off the books, the federal education department reported.

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Take a look at credit consolidation

Whether or not credit consolidation is right for you depends on your individual circumstances, but it has a number of advantages. According to Federal Student Loan, a division of the U.S. Department of Education, one of the positives is the ability to convert loans from a floating rate to a fixed rate.

“Paying back your student loans can be a daunting task for many college graduates. The debt burden may make it seem impossible to be successful in the future, ”said Max Kimmel, owner of One Shot Finance. “However, there are steps you can take to successfully repay your loans and still get ahead in life.

“My favorite piece of advice is to consolidate multiple federal loans into one payment with one federal direct consolidation loan. This makes the monthly payment less individual and easier to manage, which can reduce your overall interest by up to 0.25%. “

Read more: How Much Debt Americans Have at Any Age

Consider refinancing

Refinancing your student loan and taking out a new loan from a private lender can save you money by lowering your interest rate or choosing a repayment plan that will pay off the debt faster. The downside is that once the loan goes private you lose the opportunity to get federal assistance like the Public Service Loan Program. Most lenders require borrowers to have a credit score of at least 650 and permanent employment.

Any of these scenarios could help existing borrowers escape their student loan debt, but it’s not easy. And what advice would you give to those just starting college? Make sure the degree you are aiming for is paying off and don’t borrow more nickel than you need.

“When it comes to ROI, there are no hard and fast rules, but common sense should apply,” said Paul Oppong, a management consultant. “A good rule of thumb is not to spend more on school than you can expect to make after graduation. If you’re spending $ 100,000 on four years of study but only making $ 30,000 after graduation, the investment makes no sense. On the flip side, it can make sense to spend $ 50,000 on college and make $ 60,000 after graduation. “

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Last updated: September 15, 2021

About the author

Jami Farkas graduated from California State University in Fullerton with a degree in communications and has worked as a reporter or editor for daily newspapers in all four corners of the United States. She brings experience as a sports editor, business editor, religion editor, digital editor and more to GOBankingRates. Passionate about real estate, she passed the real estate license exam in her state and is still wondering whether to take the plunge into selling houses – or just writing about selling houses.

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