Limiting Student Debt through Proper PreparationSubmitted by Financial Asset Management Corporation on February 25th, 2016
College is a necessary, but expensive, endeavor in the life of any young American citizen. Higher education helps propel individuals into economically stable and rewarding careers. However, Forbes points out that the nation's nearly $1.2 trillion in student loan debt is crippling students, their families, and the economy. There is a way to limit the amount and impact of student loan debt, and it's simpler than you might think: proper preparation.
FAM Ideals: Plan Today for a Secure Tomorrow
If you want a financially secure tomorrow, for yourself and your children, the key to that end goal is planning ahead. Part of successful preparation for college involves placing education, and education planning, in a place of high regard. When you view education planning as a critical factor in the future of your financial life or that of your child, you are going to experience more success avoiding debt because you understand the value of saving and the importance of education.
Working with a reliable financial planner, you can develop a road map to help your child achieve life's major milestones, such as college graduation. You can even develop a strategy for saving money and meeting those goals.
Save Money ASAP
Never wait for tomorrow when you can start saving today. If you can start setting aside money, regardless of amount, for college now, do it! Start by creating a budget that takes into account the money you wish to set aside for a college fund. Just like preparing for retirement, a good college savings plan should take advantage of compound interest over years, rather than trying to play catch up after starting late.
If possible, increase your income by taking on part-time jobs, encourage your child to do the same as they age, and look for work-study programs with potential schools that will help lower your child's tuition costs. CNBC listed saving money, and doing so early, as the first step in cutting down on student loan debt.
Apply for Scholarships and Grants
No one stands around college campuses handing out free money, which means you'll have to do some digging eventually to find the extra money you want to help pay for school. Scholarships and grants are a great tool for lowering debt because they help cover the cost of school and don't have to be paid back. There are a wide variety of scholarships and grants available, from athletic and academic scholarships to Pell Grants and other government assistance options. Research these opportunities ahead of time, and apply early.
If You Take Out Loans, Follow these Steps
If you will be taking out additional loans for college, especially private loans, approach them with caution and be smart. Keep track of every detail on each of the loans you take out to pay for school. It's vital to understand items such as the minimum payment amounts and which loans qualify for deferment, forgiveness, or adjusted payment plans. For example, volunteering with certain organizations may qualify you for student loan forgiveness thanks to your service.
As you begin to pay back your loans, start by focusing the majority of your money on the loan with the highest interest rate. Whenever possible, choose the best payment and repayment plans available so you aren't crippled by the payment of your debts.
Last but not least, don't be afraid to explore a variety of options. You might be able to use an income-based repayment or pay-as-you-earn plan to whittle down your loans. It may also be an option to use student loan consolidation if you have multiple loans, creating one loan repayment that covers all of your outstanding loans. Above all else, don't ignore your other debts for the sake of paying off your student loan debts faster. Forgoing credit card payments or opening new lines of credit only increases the burden on your finances. Contact Financial Asset Management Corp. today for more help getting your plan started.