Many students are finding it difficult to pay back their student loans in the first year after graduation. In fact, the amount of individuals defaulting on their student loans is up approximately 7%. However, in a recent story on “The Early Show,” this is one of the worst things that can be done in terms of credit scores. As a result of defaulting, the lender can come back and garnish as much as 15% of wages, withhold tax refunds, and even place restrictions from obtaining a professional license. However, if a student can’t find a job and has no way to repay the loan, the next step to avoid defaulting is to contact the lender directly. Many will work with students to add extensions or defer payments until income is flowing more regularly. This could add extra fees and more interest in the long run, but it is highly preferred to defaulting on the loan.
Using a debt consolidation service is also a great option for those who have multiple loans with differing interest rates and who want to combine them into one monthly payment. Sometimes using a service like this can reduce the monthly payment by as much as 50%. For students looking into the process of obtaining money for educational expenses, using a federal loan can provide a lower interest rate and more flexibility for repayment options. Generally, loans have to be paid back within 6 months following the graduation date, but working during school or even during breaks from classes can be a way to start saving or making small payments toward the loan prior to graduation. Sticking to a budget is crucial to ensure that the amount borrowed is used for necessary expenses, instead of vacations or other extravagances. By following these steps, students won’t have to make such a large adjustment after graduation when the loans must be repaid.
