Student Loans + Credit Card Debt = Stress
Rising tuition costs and excessive borrowing have left many recent graduates struggling to afford basic living necessities, according to findings from Accounting Principals' latest Workonomix survey. Although Congress took decisive action to stop student loan interest rates from rising, many recent grads are still grappling with high debt after graduation. According to Accounting Principals' survey, a majority (68 percent) of recent graduates are leaving school with an average of nearly $40,000 of debt. Most of this debt has been accrued through student loans ($27,029); however, recent graduates also leaned heavily on other debt ‒ like credit cards ‒ to get them through college, amassing an average of $12,742 of nonstudent loan debt upon graduating.
Paying Student Loan Debt
There are various loan repayment options, including:
- Pay in full. If you have the money, you can choose to pay back all you owe at once, without owing any more interest. Usually, this option is not viable, or else you probably did not need to take out the loans in the first place.
- Standard Payment. You make monthly payments to pay back your loans with interest within ten years. This gives you the best interest rate, but requires the highest monthly payments.
- Graduated Payment. This is a viable option if you get out of college expecting to make a modest but steadily increasing wage. The payment requirements will start off low, then increase every couple of years for the next 10 to 30 years.
- Income-Based Payment. You may choose to make your monthly payment bill proportional to the amount you currently make and get up to fifteen years to pay it off.
- Long-Term Payment. You pay back your loans plus interest in thirty years with monthly payment.
- Consolidation. Basically, if you owe multiple creditors, you can combine these loans into one big loan and take longer to pay it off, with more interest to pay, of course. Many companies are offering loan consolidations; do your research and shop around for the best rate.
- Deferment. If your loan is unsubsidized, you can negotiate with your creditors to give you a time period during which you do not have to pay, but will allow interest to continue to accrue. You can defer your loans automatically if you go back to graduate school.
- Forbearance. Similar to deferment, in that you get a grace period, forbearance allows you to negotiate with your creditor a three-month period during which you do not pay, provided you document a circumstance of hardship.
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