Accordign to the Financial Literacy Survey in 2019, 9% of the participants were paying their student loans and 3% were paying their children’s student loans. The student loan debt crisis extends across multiple demographics and has amounted to $1.5 trillion dollars.
It is currently the second highest consumer debt affecting americans, right after mortgage debt. Both homeowners and college educated folks are impacted by the debt crisis. Yet formal education in the modern world does little to prepare the future generation for this ordeal.
As a fresh graduate recently introduced in the job market, what can you do to avoid stumbling and entrapping yourself further in this epidemic? Student loan default can also impact your credit score. Are you prepared to recover from this on your own?
There is no need to despair, student loans can also help you build your credit score. But this is only possible if you manage to make your payments on time. Here are some ways you can manage to not let your situation tamper with your scores.
Budget like there’s no tomorrow
Whether you’ve started working full-time, or work freelance in your industry, you should aim to have a steady income after graduating. Whatever income you get after you pay taxes, should be allocated to an efficient budget. You can opt for a 50-20-30 rule to put at least 30% of your income into your debt repayment. If you persevere very strictly for the first year or two, you can significantly manage and keep your debt in control. Cut down expenses which seem too luxurious.
Pay credit card installments on time
If you have more than one debt, make sure you manage all of them well. Paying your credit card payments on time can help you maintain your credit score. In case your student loans take a toll on it later, don’t lose. Just follow the next step!
Avail professional help
You can see professional credit repair services to help you keep your score correct. You can also avail credit counseling services from a reliable consultant to stay afloat. Credit repair or analysis services will be able to provide you more knowledge about your individual situation.
If you find yourself in a student loan default situation, there are ways you can pull yourself out. Here are some ways highlighted by experts to help you.
Repay the entire loan in full
While this may seem easier said than done if you have the option to repay your loan in full, you shouldn’t hesitate. A sudden influx of a large sum of money from inheritance, or a family member willing to help you out can help you in the situation significantly.
Consolidate your loan
Combining all your loans will require you to make three payments on time first. You can then apply to the federal direct consolidation loan. You can also apply the income-driven repayment plan which can help you make monthly payments from your income and make things relatively easier.
Rehabilitate your loan
Consult with your loan collection agency and work towards making payments which are more affordable for you. Let them know that you want to get out of a default situation. This will help you make payments which are easier and more suitable to your budget.
Masters Credit Consultants can help you repair your credit and help you avail better interest rates on your current loan. We can help you build your credit easily and offer free credit consultancy in South Carolina.