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11 Superb Student Loan Debt Hacks

11 Superb Student Loan Debt Hacks

Blink.

Did that take the better part of a second? There, student loan debt just grew by $2,726. According to Marketwatch, that around three-thousand dollar number, accumulating every second, is part of about $1.3 trillion dollars graduates now owe for their college educations.

The debt can be a lifelong leech. What would life be like without it? This is the question millions of people are asking. We pursue a career because we’re passionate about something. But plenty of us also pursue a career, and get a degree, because we want to make good money. Paradoxically, this pursuit of good money means we owe more than ever before.

Don’t despair. This is a chance to tackle a very real problem, a problem shared by 40 million Americans and counting. You’re not alone here. Plenty of us feel this is out of control. Think of taking control as a continuing education process. You’ve got to own the debt, corral it, and work with it until it’s out of your life.

1. Organize daily finances

It will be easier to sort this out if all of your daily finances are in order. Here are the steps:

Organize by using free services – Mint and Personal Capital are both tools for putting all of your accounts, including bank accounts, investment accounts, and student loan accounts, onto a single dashboard where you can see them

Do autopay – Your budget should be setup so your loan repayment is part of basic expenses that don’t change; tell your bank to autopay basic expenses online each month and make sure you deposit enough from each check to cover the autopayment. Setup overdraft protection in case something goes wrong, set up auto-debit directly with your lender, and receive a twenty-five cent discount on your interest payment

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Audit yourself – At tax time each year, check your accounts thoroughly to make sure nothing is amiss

2. Look into loan forgiveness

You may be eligible for loan forgiveness. Here are the types:

Public Service Loan Forgiveness – To qualify for PSLF, you must work for a non-profit, the government, or “a private company that provides public services”; also, your loan has to be from the federal Direct Loan Program, and you have to have already made 120 payments; check out the hack on income-based payment plans for info on how you can pay nothing per month but have it qualify as payment

State forgiveness – 45 states offer forgiveness; the majority of these programs also require you to have a job in public service. Go here to find information state-by-state

Perkins Loan cancellation – This also applies to public service individuals who received a Perkins Loan; in particular, teachers who work in any of the teacher shortage areas, or at low-income schools, qualify. For the full list on who’s eligible and the amount that could be forgiven, go here.

Military Forgiveness – Military personnel qualify for the PSLF, the Perkins cancellation, the National Defense Student Loan Discharge, and the Veteran’s Total and Permanent Disability (TPD) Discharge, as well as a number of deferments and repayment programs

3. Check out a DIY payment guide

This guide offers advice on the following:

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Why making larger payments makes sense – simply paying $200 more than the minimum payment per month saves you $2,400 on interest, and you pay off the loan 4 years earlier

The value of the right mindset – listing the reasons why you want to live frugally, in order to pay off your debt quickly, will help prepare you for the challenge of tightening the belt

How to create a spending plan – looking at your last three months of bank statements will help give you an idea of your average expenses

How to track spending – you can create a spreadsheet with each expenditure listed, and phone- reminders of when to make payments

Creating an emergency fund – start with $1000 and then try to save 3 to 6 months’ worth of expenses

Taking on an extra gig – the gig economy offers a ton of options, such as driving for Uber, and according to Fabio Rosati of Upwork, this economy contributes “more than $700 billion to our national economy”. Why not take advantage of the options?

Creating your repayment plan – The National Student Loan Data System will pull up all your loan services, and from there you can decide on a “Snowball Method” or an “Avalanche Method” of repayment

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Looking at alternative repayment plans – Loan consolidation, deferment, and forbearance are all options available to you

Getting a support system – having someone there to keep you accountable is priceless

Rewarding yourself – finding small ways to do this will help keep you on the payment path; after all, man cannot live on bread alone

4. Look into income-based plans

In December of 2015 the federal Revised Pay As You Earn (REPAYE) program will go into effect. This program is more lenient than any of the income-based programs that have been available. Under this program, if you received a Direct Loan, you’ll pay no more than 10% of your discretionary income. “Discretionary” income is Adjusted Gross Income above 150% of the poverty level for your household.

If you absolutely have no job and no income, you’ll still qualify for this plan—unless you’ve defaulted on your loan. You could end up paying nothing per month if 10% of your income is nothing. But interest would still accrue.

You can also consolidate your Federal Family Education Loan (FFEL) and Perkins Loan into a Direct Consolidated Loan, which would then be eligible for REPAYE.

5. Look into consolidation  

A caveat: you can’t consolidate private and public loans. Consolidating your state and federal loans will allow you to pay less per month, but once again there’s the issue of interest adding up as you’re making minimum payments. Still, consolidation will simplify the situation, giving you one payment at a set interest rate. And thanks to REPAYE, that payment could be very low, which will help a great deal if you’re strapped for cash right now.

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6. Deduct your interest  

Look at the information your lender has sent you. Anything helps, and you can reduce your taxable income by up to $2,500 if you’ve been paying on the interest for your loans. If you qualify for deferment or forbearance (meaning you wouldn’t have to pay on the principal of your loan for a certain period of time), try scraping together money to pay on the interest, and then look into deducting what you pay from your taxes.

7. Volunteer for Zerobound

Here, you can sign up to volunteer and get crowdsourced money to go towards paying your student loans. SponsorChange is another site of this same nature. Make sure to familiarize yourself completely with these opportunities before you take them.

8. Volunteer elsewhere

AmeriCorps, VISTA (Volunteers In Service To America), Peace Corps, Teach for America, and National Health Service Corps offer forms of student loan forgiveness or reimbursements.

9. Try a student-friendly cash-back credit card

Be careful with a credit card; it’s the same as taking on more loans. But if you are confident in your budgeting skills, a card such as UPromise is specifically designed to give you good cash-back rewards from your purchases, which can then go directly toward paying off your debt. You’re going to be making purchases anyhow, and this is a chance to make money from them. But you have to be highly disciplined.

10. Consider refinancing

Right now this will lower your interest rate. But once again, be careful. Refinancing will put you in private loan territory, where none of the options (listed above) for a federal or state loan apply. Don’t refinance unless you’ve got a good job, are sure you can meet the principal on your loan, and are simply looking to pay less interest. But be aware that interest rate could go up.

11. Be aware of the discounts

There are direct-debit discounts, on-time payment discounts, graduation credits, and a degree of forgiveness available from certain lenders. The Department of Education also offers two types of discounts.  

Featured photo credit: Light brigading via flickr.com

More by this author

Dan Matthews, CPRP

A Certified Psychosocial Rehabilitation Practitioner with an extensive background working with clients on community-based rehabilitation.

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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