By: Mevish Jaffer
Some students who are pursuing a college education are fortune enough to have their parents finance their expenses. However, for the countless individuals who arenít so lucky, paying for school often means working two jobs and taking out several student loans. In fact, many students tend to make the mistake of opening multiple accounts while theyíre still in school. Students often base this decision under the false belief that once they earn their degree, a financially rewarding job will be waiting for them, enabling them to pay off their debt in a reasonable amount of time. What students fail to realize is that it can take a lot longer to find a job after graduation, making it difficult to stay on top of their loan payments. This is especially true when they have various other bills to deal with as well. According to different student loan default statistics, students take an average of 10 years to pay off their loans after graduation. This is why the words Ďstudent loansí and Ďdefaultí often go hand in hand.
Defaulted student loans occur when borrowers fail to make their monthly payments on the required date specified by the lender. A student loan default status is also common if lending institutions are unsuccessful in their efforts to collect payments from borrowers. The long-term repercussions of defaulted student loans make any future financing possibilities very difficult, if not impossible, for students. A big reason why many individuals face student loan default is lack of preparation prior to borrowing money. Fortunately, there are many ways in which individuals can prevent this from happening. The following tips can help students prepare for the responsibilities associated with student loans, and help them to avoid default status:
1. Evaluate All Available Options
Before applying for student loans, itís important for students to determine how necessary the loans are. If students are able to qualify for scholarships and different governmental grants, those options should be reviewed first.
2. Prepare for Payments
If student loans are absolutely necessary, borrowers must be aware of the long-term financial obligations and responsibilities that will be attached to them. Student loan calculators can be used to figure out monthly payments, as well as the number of years it would take to pay off the debt.
While students are still in college, itís very important for them to be involved in different clubs, organizations and networking events, such as job fairs. Getting in contact with the right people while they are still in school will give students a better chance of landing a job right after they graduate. This will enable borrowers to generate an income immediately, which in turn helps them to avoid defaulted student loans.
4. Make Payments On Time
While itís a lot easier said than done, the most simple, and obvious way to prevent a defaulted student loan is to make your monthly payments on time. One of the ways students can stay on top of their payments is by creating a budget for themselves. When students spend their money wisely, look for ways to save, and limit purchases to essential items only, they can continue making payments towards their debt.
Being organized is very essential when it comes to successfully maintaining student loans and avoiding default. Students can stay organized by keeping all of their important student loan documentation in a folder. This can include checks, receipts, notices etc. When students keep track of such details, they are able to clearly see how much is still owed on their outstanding loans before the debt is paid off in full.
6. Open communication with lenders
Students need to stay in contact with their lenders and update them about any changes that will affect the loan. This can include change of name, address, graduation date etc. Itís also crucial for students to get in contact with lenders when they experience financial problems. Many lenders offer options such as forbearance, deferment, or alternative repayment plans.
7. Loan consolidation
Student loan consolidation can often help borrowers avoid defaulting on their payments. Consolidation works by combining the studentís outstanding loans into a single loan. The repayments for a consolidated loan are much more manageable for students, as they only have to make one payment every month as opposed to multiple installments.
By considering all the available options for financial assistance, and preparing for the financial responsibility that goes along with borrowing money, individuals can prevent student loan default and pay off their debt.