Avoiding Student Loan Debt

Student loan debt is at an all-time high of $1.56 trillion in 2020.

It only takes a look at the latest student loan statistics to know the level of seriousness of the student loan debt crisis. The crisis has now touched borrowers across all age groups and demographics. The U.S alone has about $45 million borrowers. This number together owes student loan debt amounting to nearly $1.6 trillion. 

These figures put student loan debt at the second spot in the consumer debt category. Coming behind none other than mortgage debt, yet it is higher than auto loans and credit card loans combined. According to the Institute for College Access and Success, on average, each member of the 2018  class graduated with about $29,200 student loan. This is a 2% increase in the debt figures of the previous year. 

Our Perspective

If it’s any consolation, you aren’t alone if you worried about your student loan debt, or trying to avoid ending up neck-deep in it. However, it’s virtually impossible to complete a college education without financial assistance. Unless you are from a wealthy family (at least that’s what the majority of people believe). 

At ForgetStudentLoanDebt, we believe in providing you with all the information you need to make an informed decision about your financial future. As students, you need to take charge of your future by making smart decisions in the present. For the most part, many remain ignorant about one simple truth. 

Student loan debt is avoidable!

Hence, we believe it’s time more students found out how to graduate without drowning in a sea of student loan debt. However, if you already find yourself dealing with a student loan crisis, you aren’t left out either. You will find resources about available loan forgiveness programs that can relieve the financial burden.

Nevertheless, prevention is always the best cure for student loan debt. Therefore, let’s dive into some techniques for avoiding student loans by first understanding student loan debt.

Understanding Student Loan Debt

There are different types of debts, and student loans can be categorized as “good debt.” When you think about it, borrowing money to invest in your education isn’t a bad thing. Especially if this education would have been unattainable without this borrowed money. 

So when does student loan debt become a problem?

Like everything, the lack of understanding can turn it into a disadvantage instead of an advantage. Hence, it’s essential to understand student loan debt, how it works, and learn the right way to use them to finance your education before you proceed to borrow. This is what we term borrowing wisely. 

Borrowing wisely starts by getting the details right. However, it’s not mandatory to borrow. Because the more you borrow, the more difficult you’ll find it to pay up. For many, they can’t imagine a life without student loans. This isn’t always the case; you can have the brighter future you desire through other means of financial assistance (more on this later). 

Furthermore, there are three different types of student loans. Namely, private loans, federal loans, and refinance loans. Your financial future will look very different depending on the type of loan you choose to borrow. 

Federal Loans – These are government loans provided to students at a different level of the tertiary academic ladder. 

Private Loans – These loans come from credit unions, banks, and states, and the same goes for refinancing loans. However, you have to leave school to refinance your loans. 

Under each of these three loans, there are subdivisions of loans. 

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Types of Private Student Loans

Typically, private student loan lenders want to be sure you can repay your borrowed funds. Hence, they require applicants to have good credit scores. Also, you may need to provide a cosigner. This person takes responsibility for paying the loan in case you fail to do so. Among the types of private loans banks and other financial institutes provides we have the following:

  • International student loans
  • State loans
  • Medical school loans
  • Bar exam loans
  • Credit union loans
  • Student loans without a cosigner
  • Student loans for bad credit

Types of Federal Student Loans

You get several different loans from the federal government. Congress determines the interest rates of these loans every year. With federal loans, the federal government protects its interests through means like tying the loans to borrowers’ monthly income after graduation. There are other options like student loan forgiveness for those working in a public service field. 

Also, they don’t require good credit or cosigner. Almost all students with valid high school diplomas can benefit from these loans. To apply, you only have to complete the Free Application for Federal Student Aid form called FAFSA. 

The different types of federal student loans include:

  • Plus loans
  • Direct unsubsidized loans
  • Perkins loans
  • Direct subsidized loans

Types of Refinance Loans

These loans are for graduates who have shown a commitment to paying their student loans. You can refinance your existing student loans by allowing a private lender to pay off your loans. This lender then gives you a lower interest rate and a new repayment schedule. 

Remember, you need to have a credit score of about 690 or higher to be eligible for refinancing loans. Also, if your student loan debt package includes federal loans, you’ll lose your federal loan protections once you refinance. 

The different types of refinance loans include:

  • Medical school refinance loans: post residency
  • Parent plus refinance loans
  • Medical school refinance loans: during residency

All these loans come with different terms and conditions; you will be doing yourself a great disservice. You borrow without adequate information and understanding of the type of loan you intend to borrow. But then again, it’s always best to avoid student loan debt. 

But how? Let’s find out below. 

How to Avoid Student Loan Debt

The underlying idea here remains the fact that you need to rely solely on student loans. There are steps you can take before you enter college, and when you are a student, these steps will help save or raise money to cover the high costs of tertiary education. Below we outline some of the most popular of these loans. 

Get Out of Unemployment

It doesn’t matter if you’ve been unemployed for a long time. Getting a Masters or Ph.D. isn’t an effective way to hide the fact. This approach only prolongs the inevitable and plunging you further down the financial abyss. Thus, you should only return to school after you have carefully counted the cost and calculate the ROI on fees you have to pay. 

Exploit Military Benefits

Seriously, not many graduates will readily enlist for military service. But enlisting comes with many benefits for those in the military. You’ll find serving your country, has several benefits like the Post 9/11 GI Bill, which includes tuition discounts for veterans and military scholarships. 

Moreover, education is a priority in the military. Therefore, each branch provides various benefits once you become part of this brotherhood. The aim is to incentivize college education and degrees. Hence, those who use financial aid for their college degree, then the military might be a better option than borrowing tens of thousands of dollars and going into student loan debt. 

Adopt Need-Based Borrowing

The quickest and easiest way to irreversible indebtedness is borrowing beyond your needs. Before you apply for any of the student loan types listed above, you have to assess your needs and determine the amount you need – not what you want. The amount of money that can get you through school will do. 

Education Purposes Only

Funds from your student loans are not for personal expenses. This point, we cannot overemphasize. Some have used their student loans for things like clothing, furniture, computers, and other consumer goods. There is a way to avoid this, simply divide your personal budget into two expenses. The two categories will be experience costs and education costs.

After this, always remember never to spend your student loans on experience costs.  

Get a Part-Time Work

Many graduates look back on their college days with regret. One thing many wish they did while on campus was to gain more experience from paying jobs. Sure, you have to focus on your education. But what are you really learning for, if not for your future job? 

Therefore, instead of spending your free time watching TV or partying, focus on getting professional experiences. Not only will you get a good looking resume, and you’ll also have extra income to help cover costs and maybe some educational costs too. Also, there are paid internships that you would give a try.  Some popular sites to find internships while in college are:

  • Craigslist
  • Indeed
  • Internships
  • Experience
  • Idealist

Find any Available Scholarships

Everyone will agree that scholarships are god and come with many benefits. But you will be surprised to know that not many people apply for a scholarship when heading to college. According to a study in the U.S, thousands of scholarships remain unclaimed year after year. The reason for this being, nobody took the time to complete the application process. 

Hence, you can literally save yourself thousands of dollars if you can take time each day to fill out application forms. If you’re unique in any way, have any beliefs, abilities, or skills, there is likely to be a scholarship out there waiting for you. 

Get Some Grants

If you like scholarships, you’ll love grants, since you don’t have to think about paying back. Therefore, when you get to the point where there are no other scholarships to apply for, grants are your best bet. These funds help low-income students and gifted students with money to assist in education expenses. 

Moreover, education is a priority in the military. Therefore, each branch provides various benefits once you become part of this brotherhood. The aim is to incentivize college education and degrees. Hence, those who use financial aid for their college degree, then the military might be a better option than borrowing tens of thousands of dollars and going into student loan debt. 

Save often and Early

Those of you who are yet to begin college can begin saving for your education early. It might be difficult to keep your spending under control now. However, the best time to begin is when you don’t have to save because of a mountain high student loan debt. The best practice is to put away half of everything you earn. Put these savings away, ideally in a savings account. It could also be an investment account or mutual fund, where you can earn a decent income on your money. 

Moreover, education is a priority in the military. Therefore, each branch provides various benefits once you become part of this brotherhood. The aim is to incentivize college education and degrees. Hence, those who use financial aid for their college degree, then the military might be a better option than borrowing tens of thousands of dollars and going into student loan debt. 

Find a School You can Afford

Believe it or not, you don’t have to get your education from an Ivy League school to get a great job. Most of the influential people in today’s world do not even have a college education. Those who’ve had their share of experience on both sides of the job-seeking table will confirm the facts. 

Today’s employee’s care very little for the school you attended. Your employability probably depends on whether you can have a fruitful and engaging conversation. 

Other ways of avoiding student loan debt include:

  • Leverage Online Course
  • Complete As Soon as Possible
  • Learn About Post School Earning Potential
  • Calculate Your Potential ROI

What if You Can’t Avoid Student Loans?

Federal Loans vs. Private Loans 

On some occasions, it’s simply impossible to process without borrowing for your education. In this case, you will have to choose between the two. These are federal loans and private loans. We recommend federal loans mainly because of the loan forgiveness programs you will be eligible to enjoy. Programs like the Stafford Loan Forgiveness and Perkins Loan Cancellation are only available for borrowers of federal loans. 

Nevertheless, if you have to take out a student loan, the following tips should help safeguard you from falling into a financial predicament. 

Borrow Less Than Your Expected Initial Annual Salary

The only way to get rid of your student loan debt without the overwhelming sum of compound interest is to pay off as soon as possible. And the best way to ensure you pay easily and quickly is to borrow as little as possible. According to conventional wisdom, you take no more than the total amount of annual income you expect to make in your first year of working after graduation. 

Take Advantage of Community Colleges

You can opt for a community college for the first two years of your education. This will help you prevent wastage of tens of thousands of dollars studying courses that will make no significant difference to your financial life. Hence, you can save yourself all the trouble by remaining in your locality. After all, when you later graduate, it’s the name of the big school that will decorate your diploma. 

Therefore save money on your tuition fees, rent, moving expenses, and transportation by staying local, at least for the first two years. Chances are, no one will ever know you didn’t spend your first two years in a big-name school. 

Apply to a Public School

So your parents, grandparents and great grandparents all attended a private school. But you really have to follow this tradition? Times have changed, and private schools are literally 3x the cost of public schools. If you consider the amount of value the extra cost gives you, it becomes clear that there is little or no difference between the private and public schools (except for the inflated costs). 

According to a college board report from 2009, more than 60% of private school graduates come out of schools with an average student loan debt of $26,000. On the other hand, graduates from public schools complete with an average of $19,800 in debt (nearly half). Try and learn to look beyond the brand name and family tradition. Rather assess the quality of education, public and private schools provide. 

If the difference doesn’t match with the difference in student loan debt, then there is little or no reason to choose the option that plunges you deeper into debt. The smart move is to choose an in-state school to avoid out-of-state fees and tuition. 

Approach the National College Finance Center for Help

The responsibility of choosing the right student loan can be quite overwhelming. That’s why you need all the assistance you can get. There are free resources like the National College Finance Center’s website, where you can find student loan repayment plans and personalized college finance plans. 

Also, you can find need-based information on our website to help you navigate the confusing financial terms and forms. Also, when looking for help, you need to watch out for student loan forgiveness scams. Ideally, you want to trust authority sites, non-profit organizations, and government institutions. These were set up to assist students in such matters. All you have to do is approach them for help. 

Often, you find trustworthy advice available on how to manage your debt. You’ll find different options like loan forgiveness programs and how to best choose your lender so you become eligible. 

Apply for Student Loan Forgiveness Help

If you struggle with university student loan forgiveness, then you should get help with that. Because the employees in these agencies are dealing with the student loans every day and they have enough experience for solving different kinds of student loan problems.

Managing Student Loan Debt

For some graduates, debts have already been racking up through credit cards and student loans during school. If you find yourself in this situation, all isn’t lost. You can manage your student loan debt and slowly but surely get out of this financial crisis. This begins by knowing the choices you have at your disposal to help get rid of student loan debt. 

Some of these include:

  • Student loan consolidation
  • Income-based repayment plans
  • Student loan refinance 
  • Student loan forgiveness
  • Loan cancellation program for students
  • Student loan discharge programs

Of all these options, leveraging student loan forgiveness plans remains one of the most cost-effective means of managing student loan debt. Hence, let’s take a closer look at it. 

Leveraging Student Loan Forgiveness Programs

Generally, borrowers of federal student loans could be eligible for a loan forgiveness program under multiple eligibility criteria. Usually, students find it too good to be true. Sure, the fact that you could have tens of thousands of dollars wiped clean of your slate sounds a bit far fetched. However, under various government programs, you could find legitimate ways to some, if not all, your student loan debt. 

Note that the following programs are only available to students who took out federal loans for their education. Thus, we usually recommend federal loans instead of private loans. The specific requirements for some of these programs are very stringent. Thus, many borrowers choose income-based repayment plans as the most convenient way of managing their student loans. 

Public service loan forgiveness

You can qualify this student loan if you’re a graduate working for the government or a non-profit organization provided you have a federal loan. Under this program, your remaining loan balance can be written off after you’ve made 120 repayments. To be fully eligible for the PSLF, you’ll have to be part of an income-driven repayment plan

Income-driven repayment forgiveness

Under the federal government, you can enjoy four main income-driven repayment plans. Through these plans, you use a percentage of your monthly income to cap your loan payments. Provided you find yourself under any of these plans; you will be eligible for loan forgiveness after 25 to 20 years of being enrolled under these plans. These plans are most suitable for borrowers with huge differences in their income and loan balances. 

Teachers loan forgiveness

Are you a teacher full time employed in a low-income secondary or public elementary school? If you answered yes, then you can benefit from the Teacher Loan Forgiveness after continuous years of work. You only must have borrowed your student loan after Oct. 1, 1998. The total of about $17,500 in Stafford or direct federal loans forgiven will surely do you some good. 

Obama student loan forgiveness

In truth, the Obama student loan forgiveness program doesn’t exist. However, companies use it to refer to free federal programs. They charge unsuspecting students to enroll them in these programs which are nothing but federal student consolidation and income-based repayment plans. Always remember, these programs are free, and you shouldn’t pay anything to enroll in them. 

Nurses student loan forgiveness

Nurses paying student loans have many options for forgiveness programs. Some of these are the Perkins loan cancellation, Public Service Loan Forgiveness, and the Nurse Corps Loan Repayment Program. This program pays off about 85% of the student loan debt dept of nurses who qualify for it. However, most nurses qualify for Public Service Loan Forgiveness because the Nurse Corps program is very competitive, and the number of borrowers with Perkins loans is very low. 

Additional Niche Student Loan Forgiveness Programs

These are usually called payment assistance programs. You can either qualify for these through the state or federal programs. Note that to be considered for these programs will depend mainly on either the organization you work with or your profession. Please them below:

  • State-sponsored repayment assistance programs
  • Student loan repayment assistance programs
  • Military student loan forgiveness and assistance

Aside from these, there are loan cancelation programs like the Perkins loan cancellation program. For this, you’d have to be a borrower of the federal Perkins loans to get 100% of your loan canceled. Lastly, there are student loan discharge programs. Some of these discharge programs include the following. 

  • Borrower defense to repayment discharge
  • Closed school discharge
  • Discharge due to death
  • Total and permanent disability discharge
  • Total and permanent disability discharge for veterans.

Below are some of the various student loan forgiveness programs you can apply for. 

Beware of these Caveats

Though you can get free student loan debt cancellation, forgiveness, and discharge through the Department of Education, you need to be mindful of other costs. Some of these are:

Taxations on Forgiven Student Loans

Whether your student loans are discharged, forgiven, or canceled, you will be taxed since the authorities consider it an income. It is only in the event that you work for particular types of professions or work that you may escape this tax. For example, you won’t be paying taxes on your forgiven loans under the Public Service Loan Forgiveness program. 

Under the latest tax code, the taxing of loans discharged upon a borrower’s permanent disability or death has changed. You will no longer have to pay any taxes on loans discharged under these programs starting from Dec. 31, 2017. 

Scams

It is common to find “debt relief” companies offering to help borrowers get rid of student loans. However, upon investigation, you’ll realize that they never deliver on these promises. Yet, they charge hefty fees from already burden borrowers. Any company or agency that offers to help you rid yourself of your debts at a cost should raise a “red flag.” 

Also, we must state that you will only get loan discharges through the legitimate channels laid down by the governments. Typically, these are the programs set up by the government to help lessen the financial burden of indebted graduates and students. 

Difference between Discharge, Forgiveness, and Cancellation

The term discharge, forgiveness, and cancellation aren’t so different from each other. Cancellation or forgiveness describes when you no longer have to make monthly or scheduled payments to cover your student debts because of your profession or job. 

On the other hand, if you don’t have to repay your student loans because of other circumstances like permanent or total disability, closure of your school, or death, then discharge describes your case. Though these options exist, there are still millions of graduates and existing students who find themselves in very bad financial situations due to their student loans. 

Hence, many are looking for alternative sources of support and money to fund their education. 

Student Loan Alternatives

One of the most popular and cost-effective ways of graduating from college without an overwhelmingly high student loan debt is living at home while you study for your four-year degree. If you do the calculations, you’ll realize the staggering amount of money you can save with this simple decision. You can use this approach to earn a Bachelor of Arts degree for as little as $50,000.