You probably have seen companies advertising student loan relief services in commercials. Like you, I’ve questioned their credibility.
Before I get started on anyone’s credibility, let’s address student loans in general.
In August of this year, the U.S student loan debt reached $1.5 trillion by the outstanding balance of more than 44 million Americans. Often times, understanding your debt is the key to making sound financial decisions. Financial literacy is also necessary if you’re trying to navigate the world of debt relief, consolidation, or better repayment options. Here’s what you need to know.
How can you make better decisions when it comes to student loans?
The education system is broken and should be treated as such. From my own experience, there are three key points for how not to drown in debt:
- Searching/applying for public financial aid like FAFSA®
- Avoid taking out private loans
- Ignore services offered by sketchy-looking companies.
If you had to take out student loans to cover the remaining balance of your college tuition, there’s no shame in that. In an ideal world, I wouldn’t want loans either, but here we are — it’s an unavoidable fact of college life for most.
If you have to resort to student loans, like most American students, consider the following options:
Federal Student Loans
Federal Student Loans would be your best option if you’re looking for lower interest rates, flexible payment options through repayment plans, and possible loan forgiveness opportunities.
These loans are given by the U.S. Government through the Federal Student Aid program. It helps families, especially low-income families, pay for college with less financial burden.
Click on each of the four loan types below to learn more about their eligibility requirements, how to apply, and more.
Much of your eligibility for Federal Student Loans relies on your submission of the Free Application for Federal Student Aid (FAFSA®). Have you ever filed your FAFSA®? If the answer is no, it’s not too late to get started. Head to our FAFSA® site to learn more about this program and how to apply.
Search for outside scholarships and grants
Numerous companies and organizations are giving back to the community through scholarship and grant opportunities. Scholarships can range in award prizes from $100 to cover the cost of your full tuition payment.
To qualify, students must meet all the eligibility and application requirements. The good news (besides the award itself) is that there are scholarships/grants out there for pretty much anything. If you’re interested, you can start by going to fastweb.com and scholarships.com.
Companies with Student loan repayment benefits
With the student loan debt sky rocking each year, many companies have taken it upon themselves to help their employees. Essentially, companies are offering their employees a loan repayment benefit that can potentially reduce their debt. If you’re currently working, you should check to see if this is a benefit your company offers.
Keep in mind, not all companies offer this sort of benefit and the benefit’s rule and requirements will be established by the company. To find out more, contact your HR department directly and ask them if they offer any student loan repayment benefits.
Stay away from private loans (If possible)
If federal loans don’t cover the rest of your cost of attendance, consider private loans.
Private loans are strict, expensive, and tricky compared to federally funded loans. I suggest that before you sign-off on private student loans make sure you research and understand all your options based on:
- Interest Rate
- Payment Plans
- Eligibility Requirements
- Any additional information provided by the loan provider
Before you sign up for loans, think ahead.
In general, I suggest that before you sign-off your loans, you search for other options. In addition, before your sign-up for a student loan relief program, consider public and federally funded programs.
If you’re unsure of whether or not you’re making the right decision, consult it with a family member, friends and/or school officials. Consult your thoughts with someone you trust before signing or agreeing to anything.
Avoid sketchy student loan relief programs and consider other options
I’m over $20,000 in debt, and like you, I’m trying to figure out what’s the best way to reduce that amount. A survey conducted by NerdWallet and Student Debt Crisis identified about 200 student loan relief companies. Most of them aren’t worth it.
Prior to enrolling in some sketchy-looking relief program consider consolidating, negotiating or paying your loans through repayment plans.
If the options I previously mentioned don’t suit your needs or you simply don’t qualify, search for trustworthy debt relief companies that might be able to walk you through the process.
How do you know if a company is trustworthy? They won’t be trying to sell you anything. If any of the following happen, chances are it’s not a trustworthy company:
- Strict payment options
- They ask for an upfront or monthly fee
- Promises to completely erase your outstanding loan balance
- You feel pressured to sign up
- They contact you by a random phone call
If you opt for a student loan relief service, make sure you understand what’s expected of you before signing up. Ask the company for written proof of the agreement and read it very carefully.
Instead of opting for such companies, consider other options like loan consolidation.
Consolidating your loans will allow you to pay it back through manageable payments. Basically, you get one payment with one fixed interest rate.
Consolidation is often a required step to access some types of repayment plans. It’s not the best choice for everyone.
I hope that after reading this piece, you now have a better understanding on how to navigate your loans.
Don’t lose hope. There’s a lot of options out there. Just be sure to decide based on what suits you best, feel free to use my tips for guidance.
Remember: There’s a light at the end of the tunnel and all your hard work will pay off. It’s not the most ideal situation, but you’re making the most of it.