The political parties are clashing in the Senate over an impending financial tsunami set to strike the country. The reason of this misdemeanor is student loan debt that has burgeoned to $1 trillion, outpacing credit card debt in the country. Moreover, the interest rate is supposed to get a fresh hike this 1st July 2012 which is about 6.8%. Furthermore, $25,000 is the average debt amount that every student currently owes to different creditors.
Graduates and students are the worst affected people in the country because of these kinds socio-economic upheavals. Therefore, students need to pull up their socks and embark on a strict financial regime to eradicate the debt hazard that will help them to lead a peaceful life devoid of financial obstructions.
Financial regime of a debt free graduate
Students can’t get rid of their debts overnight. In order to become debt free, they have to follow the below mentioned debt management guidelines, which are as follows:
- Avoid further qualification – It is an escapist attitude to enroll oneself in higher studies, just because job prospects are low or not up to the mark. Students believe that higher educational qualification will make them more employable. They also think that these qualifications will help them to stay ahead of others in the race. However, students ought to keep this in mind that they are already burdened with debt and opting for higher education will urge them to take out more loans.
Students pursuing higher studies on a part-time basis are eligible to get deferments. Even in this situation, interest rates keep compounding and drive up overall loan amount. This is particularly disastrous for students who are struggling to make regular loan repayments. Popular rule says that college debt of a student must be lower than his annual initial salary.
- Enjoy tax relief – Financial planners and tax advisors opine that graduates should quote the student debt interest deduction provision when they file their income tax returns. Students may get a maximum deduction of $2,500 each fiscal year in the interest amount paid on private and federal educational loans. The deduced amount is non-taxable and hence saves money.
- Use auto-debit – Auto-debit is a kind monthly debt repayment service that has automated money transfer facility from a checking (savings) account to repay the creditors. This is a smart way to save on postal expenses, minimize check writing hassles and make faster payment. Creditors give out incentives like interest rate reduction (by almost 0.25-0.50%) on the loans to those debtors who use these modes of payment.
Creditors make a list of all the loans taken by a student. Students with multiple loans from a single creditor, can make a combined payment with the help of the list provided by the creditor.
Finally, it’s very important that students are aware of tools to defend themselves in case a creditor tries sue him/her for defaulting on the loans. Student can take advantage of Student Loan Borrower Assistance provided by the National Consumer Law Center. Moreover, Ombudsman of the Department of Education can make loans of a student null and void, if he gets a written request from that student.
Author’s Bio: Martha Jackson loves to write financial articles and she is a contributory writer associated with the Debt Consolidation Care Community and has written several articles on debt consolidation, debt settlement and get out of debt for various financial websites. She holds her expertise in the Debt industry and has made significant contribution through her various articles.