Wondering how to pay off student loans? You aren’t alone. Millions of Americans are strapped with student loan debt. For many, getting a loan was the only way to pay for and attend college. However, paying them back can be a bit of a struggle. The good news is there are plenty of ways to pay off your loans and get back on your feet.
There are several student loans repayment options available to fit your needs. From student loans forgiveness programs to various grants provided by the government, there’s something out there for everyone. If you haven’t yet secured a student loan, you can explore all loan types available to find one that works with your situation.
What are student loans?
For most college-aged Americans, student loans are unavoidable. These loans are provided by private and public lenders to help students afford their college education. Student loans repayment does not begin until six months after graduation or after the student stops attending school, so students are not required to make any payments while they are still in school.
Private student loans can help cover what federal loans do not. Both types of loans can be used together to help students pay for college. However, it is never recommended that private loans replace federal loans, as federal loans generally offer lower interest rates and flexible payment options.
Federal Student Loans
Federal student loans are provided by the U.S. Department of Education. There are several types of loans available.
These loans awarded to undergraduate students who demonstrate financial need. The current interest rate is set at 5.05 percent. The maximum loan amount is $5,500 per year, though it depends on age.
These loans are available to any type of student, including undergraduate, graduate and professional students. Eligibility for this loan is not determined by financial need. The current interest rate is 5.04 percent for undergraduates and 6.6 percent for graduates and professionals. Borrowers are responsible for paying the interest during all periods. The maximum loan amount is up to $20,500 per year.
Direct PLUS loans are awarded to graduate and professional students as well as parents of dependent undergraduate students. The loan is meant to cover expenses not covered by a student’s financial aid package. The current interest rate on PLUS loans is 7.6 percent. The maximum amount is the total cost of attendance minus the financial aid package awarded by the school.
Private Student Loans
Private student loans are provided by banks and other financial institutions not affiliated with the federal government. There may be certain situations in which a private loan is better than a federal loan, such as when a family’s income is too high to qualify for a federal loan.
Also, a private student loan may be helpful when a borrower has already hit the maximum borrowing limit. Applying for a private loan can help cover the remainder. Some students may not qualify for federal loans due to their residency status, whereas private lenders may not consider a student’s residency for loan eligibility.
There are some drawbacks to private loans. Student loans forgiveness, for example, is not generally an option with private lenders. Some federal student loans can be forgiven down the road. The interest rate is variable, whereas federal loans have fixed interest. Also, many private loans require a cosigner with excellent credit of at least 720 or higher, which may not be feasible.
Can you get a private student loan with bad credit?
If you have bad credit, student loans may be a bit harder to secure. Private lenders are less willing to provide loans to students with bad credit than the federal government. This is because federal student loans are backed by the government, and private loans are not. If a student fails to pay a private loan, the lender takes more of a loss.
Private student loans are not the best option for borrowers with poor credit. One way around this, however, is to find a cosigner that has a score of at least 720. He or she will sign with the borrower, verifying that if the student borrower defaults, he or she is responsible for paying the remainder of the loan.
How to Get Forgiveness on Your Student Loans
Student loans forgiveness options are abundant and often depend on the type of work a borrower performs after graduation. For example, the Public Service Loan Forgiveness (PSLF) program provides loan forgiveness to borrowers employed in not-for-profit organizations and certain government organizations.
The Teacher Loan Forgiveness Program can reduce a student’s debt by up to $17,500 if they qualify. To be eligible, individuals must work full-time for five complete and consecutive academic years at a school that serves low-income students.
Other student loans forgiveness programs are industry or career-specific, like the Nurse Corps Loan Repayment Program. Registered nurses who received their education at an accredited university can have up to 85 percent of their student debt forgiven.
Student Loan Grants
There are some grants to pay off student loans ideal for borrowers involved in certain employment areas. For example, health professionals pursuing research-based careers in the biomedical and behavioral fields can receive up to $35,000 per year to work at least two years in a nonprofit research organization.
The Contraception and Infertility Research Loan Repayment Program gives qualified borrowers up to $35,000 each year to pay their loans. Eligible borrowers must be licensed to work in a laboratory. They must also be pursuing a master’s, doctoral or clinical degree in the field of contraception or infertility, and pledge to work at least two years in the field.
Making College More Affordable
Participating in a work-study program is one way that students can reduce their total debt amount. Work study is a program that allows students to work part-time at their college or university to help pay for school-related expenses.
Students involved in work-study receive at least the federal minimum wage, but can make more depending on the type of work they perform. There are limits to how much students can work depending on the total work study award distributed to each student.
Knowing how to get college scholarships can also reduce the total cost of a student’s education. Unlike loans, scholarships do not need to be repaid. Students can apply for scholarships while they are still in high school. There are millions of scholarship programs around the globe, most of which require an essay or sample work.
Some scholarships are strictly limited to students of certain groups, like women, minorities or those with tribal affiliations. There are many websites that students can use to find scholarships, including the U.S. Department of Labor. Other websites come from third-party sources, like Niche, Fastweb and CollegeBoard.