Student loans have become a necessary evil for paying for college. Too many college students fall into the scary gap of Too Poor For College, Too Rich For Financial Aid. But there are two things that a lot of college graduates are doing that are making their student loans even more expensive.
When it comes to student loan debt, there is no escape, and there are no shortcuts. But when times are tough, people burdened by student loan debt look for every option possible to get out. Before you make one of these costly decisions, make sure you understand what you're getting into.
Delaying The Inevitable
First, stop delaying the inevitable. You will have to repay your student loans. There are very few ways to get out of student loan debt without paying them back or getting them forgiven via special student loan forgiveness programs. But waiting on paying back your loans just allows them to grow.
If you don't start making payments on your student loans, interest will accrue and the debt will just grow over time. Even waiting 1-2 years after graduation could see your student loan balance balloon by 10% or more.
Instead of waiting to earn more money and letting your debt grow, you need to immediately get into a repayment program that works for you. If you can't afford to make payment, see if you qualify for income based repayment or pay as you earn programs. In many cases, you could have $0 repayment until you start earning more money. This will get you on track with a program that could potentially see your student loan debt forgiven after a set number of years, and also keep your payments manageable until then.
It's estimated that roughly 5 million borrowers qualify for income based repayment or pay as you earn programs. However, only about 700,000 borrowers are enrolled in these programs. That gap in enrollment is costing potential borrowers a lot of money.
Paying For Student Loan Help You Don't Need
Second, when times get tough, many people turn to others for help. The problem is, a lot of companies are entering the "Student Loan Forgiveness" and "Student Loan Consolidation" space, only to charge you for services you don't need. In fact, some of these companies could be classified as student loan scams.
What typically happens is that these companies advertise on the radio or television that they can help you qualify for student loan forgiveness, can lower your payments through student loan consolidation, or some combination of the two.
In reality, what these companies are doing is charging you anywhere from $200 to $1,500 (or more) to fill out paperwork that you could have filled out yourself. What they do is charge you to act as your power of attorney, and they simply call your lender for you, and ask for what student loan forgiveness or student loan consolidation programs you qualify for. Then they fill out the paperwork and tell you "how much you saved".
Instead of paying these companies, just call you student loan servicing company yourself. For Federal student loans, all of the servicing companies have very specific rules they must follow for offering repayment plans, forgiveness programs, and consolidation. You should never pay for student loan consolidation out of your pocket. If you have Federal student loans, you can get a consolidation loan for free through StudentLoans.gov.
The bottom line that instead of getting help, you end up spending a lot more money for a service you didn't need to begin with, and it will make your entire student loan experience more expensive.
