College students often have a lot on their mind and stress on their plates. They have to worry about exams, tests, homework, and study. Thanks to federal student loans, the stress of having to worry about paying for college is not as bad. When graduation comes, though, students have a whole new reason to stress.
The lender comes knocking, asking you to start making payments on your federal loans. As a freshly graduated college student, how are you supposed to make those payments? How are you supposed to make payments to different lenders while trying to keep your head above water? Fortunately, there are options for people like you to lessen the burden.
How Payments Work
If you have student loan debt, you are not alone. According to the US News, approximately 70% of college students graduated with loan debts as of 2016. On average, students found themselves with just over $37,000 in debt. As such, many students worry about making their federal student loan payment.
Lenders will provide you with a few different options. You must choose from those options of they will automatically place on what they call a Standard Repayment Plan. The Standard Repayment Plans sets your payment amount so you can pay off your loans within a 10-year period.
If you feel you need something other than the Standard Repayment Plan, you have the option of switching to another plan at any point. When it comes to federal student loans, you can breathe easy. In most situations, the amount you pay each month is based on your earnings and ability to pay.
To make your required payment, you will need to contact your loan servicer. Your loan servicer will work with you to ensure that you pay your loan down with ease. There are several different loan servicers, so make sure you know which one you need to contact. If you feel you are struggling to make your payments, you must contact the servicer for more payment options.
Unable to Afford Payments
There are many recent graduates who find themselves unable to make payments on their student loans. There are also plenty of people who maybe lose their job or experience tough times years after they graduate. Fortunately, there are choices for people who are unable to afford their payments.
For starters, you can try adjusting to the due date of your loan so you pay when you get paid and have money in your account. Changing your due date can sometimes help so you are not stuck having to pay a loan payment between paychecks.
Another option is to consider federal student loan consolidation. You can get in touch with a consolidation company to help you out. The problem with student loans is that college students often borrow from multiple sources. That means they must keep track of paying multiple loan servicers.
Consolidation allows you to combine all of your loans through one servicer. In other words, you pay one monthly payment rather than multiple monthly payments. In some cases, consolidation can also help you lower the amount you pay each month. Most importantly, it is easier to keep track of one payment rather than trying to juggle several payments a month.
Making it More Affordable
Believe it or not, there are regulations put in place that make it more affordable for graduates to afford student loan payments. If you struggle financially, it is worth looking in federal student loan forgiveness. Under the Obama Administration, changes were put into place that provided a break for graduates struggling to pay student loan payments.
The program, known as the Direct Loan Program, of FDLP, began in 2014 and allows graduates to pay based on 10% of what is considered discretionary income. The fact that it is discretionary income-based is where the huge helping hand comes in. Many lenders schedule payment amounts based on your gross or net income.
Discretionary income is the amount you have left after you pay for your necessary living expenses, which includes:
- Rent or mortgage
Your discretionary income does not include purchases you make for unnecessary items or for other loans and credit payments you make. To figure out your discretionary income, you can use the poverty guideline according to your state. For instance, as of 2017, a family of four living in the forty-eight contiguous states fell within the poverty guideline if they made $36,900 or under.
Keep in mind that the poverty guideline will reflect numbers that rise and fall based on changes in wages, the state where you live and the annually adjusted Consumer Price Index (CPI). If you struggle with low wages and poverty, it is worth looking into the forgiveness program to help lower your payment amount to make them more affordable.
Clever Ways to Save
If you are making the minimum payments possible and still find yourself struggling, do not panic. There are clever ways to save money so you can afford your student loan payments every month. A federal student loan servicing company will work with you, of course, but there are steps you can take to make it possible to afford your payments, too.
Start by cutting the cord on unnecessary expenses. As in, literally cut the cord. Although cable TV is a great entertainment option, it is not a necessity. Many people save money on cable TV prices by switching to paid streaming services such as Netflix and Hulu. Paid streaming services cost a fraction of cable TV prices, which helps save money.
Another option is to eat at home more often. You can greatly reduce your monthly food bill if you prepare food at home rather than going out to eat. Many people spend far too much money going out to eat. Even stopping at a fast food restaurant a few times in a week can add up to a big, unnecessary expense.
Consider switching from a contract cell phone plan to a prepaid cell phone plan. Many prepaid cell phone companies now offer rates that beat out contract-based monthly payments. Whereas you might spend near $100 or more on just one line, there are many prepaid providers that offer unlimited talk, text, and data for near half that amount.
Clever Ways to Earn
If cutting back on your expenses does not work, do not fret. There are also clever ways to earn money to help you make your payments on time. You can start by downsizing on items you no longer want or need. There is a lot of truth to the saying, “one man’s trash is another man’s treasure.” Post your items online on places like eBay to help earn you extra money.
You could also pick up some side jobs in your community. For instance, you could offer to walk dogs for a fee. Many people do not have the time or even the capability to walk their dog. For that reason, those people are willing to pay someone else to do it for them. While it might not make you rich, it could be enough to help you with your federal student loans.
Other clever ways to earn extra money include:
- Renting out a spare room in your home or apartment
- Selling your photos online (if you have an eye for good stock photography) to places like Shutterstock
- Tutoring other students for a fee
- Providing paid opinion feedback on products
- Becoming a part-time driver for companies like Uber and Lyft
- Participating in meal or grocery delivery in your spare time for a fee
All it takes to earn some extra income is a little creativity. A little creativity can go a long way, which helps you out when you need to pay on your federal student loans.
What Not to Do
There are few things you should not do. Do not skip on a payment. If you know that you have a payment coming due and you are short on funds, contact your loan servicer. Explain your situation and see if they can provide you an extension. Loan servicers are not out to harm you financially. They are there to receive their money, but the only way they can do that is if you can pay.
If you cannot pay, they will do whatever is necessary to work with you. There are plenty of times a person runs into an issue that prevents them from making a payment on time. In those situations, it is always best to get an extension. If you fail to communicate with the servicer, it could land you in hot water.
Failure to make your payments and failure to communicate with servicer could result in the garnishment of your wages. A servicer can also garnish money from your tax refund using a refund offset to collect the money you owe. Do not try to dodge a bullet by evading your payments. Instead, be upfront and honest about your situation. You will find that honesty is the best way to convince the servicer to work with you.