Tips to avoid the student debt crisis

U-News Staff

Nearly 20 million Americans attend college each year, and 60 percent of students borrow money via student loans to cover the cost of education.  The average student who utilizes loans graduates with $33,000 of debt, and more than 40 million Americans currently have outstanding student loan debt.

This year, the Department of Education reported that about one in four borrowers is at least one month behind on their federal student-loan payments. The number of defaulters has increased by more than 500,000 in the past year, with the total number of student loans defaulted at about 7 million. That’s roughly two percent of the U.S. The total of outstanding student loans has risen to $1.1 trillion, compared to $300 billion from a decade ago, according to the Department of Education’s study.

Here are a few tips to get rid of student loan debt.

1. Know what you owe.

Be proactive and contact your lender or visit the Department of Education’s student loan site (www.nslds.ed.gov) to look up your federal loans. Many lenders will mail notification with required monthly payments once the loan is in repayment. When you have all of the information, make a list of your loans, including the lender’s name, balance, interest rates/costs and repayment status.

2. Choose a repayment plan.

Federal student loan programs automatically enroll all borrowers in a standard 10 year repayment plan, with the first payments due six months after graduation. The government offers other repayment options that may result in lower payments now, or allow delaying repayment. Visit UMKC’s Financial Aid and Scholarships website (www.sfa.umkc.edu) to review these repayment options. Take some time to carefully consider what each repayment plan means. Take into account the length of repayment and how to accelerate your repayment as you continue to increase earnings. Once you’ve determined which repayment plan works best for the present (and future) circumstances, create your own repayment planto help you keep track of your payments and to ensure efficiency. Decide on your timeline and how much you can sensibly repay .

3. Put payments on automatic. 

If you sign up for automatic debit, most lenders cut rates or offer other bonuses to automatically deduct your student loan payment from your bank account each month. This is also a foolproof way to ensure your payment every month.

4. Pay more than the minimum amount.

If you make the suggested payments, you will prolong repayment. Minimum payments are often a representation of the interest accumulated over the previous month. Paying a little extra per month can reduce the interest and total cost over time. To ensure loans are paid off more quickly, tell your lender the extra amount you’re paying is not to be put toward future payments. Ultimately, you want to make sure that you’re paying off your higher interest rates first while paying minimums on the rest, and that payments are being applied to the principal balance.