Minimize and Prevent Student Loan Challenges

Student loans are the bane of many graduates' existence. The debt and payments can be a part of your life for 10 years or more. Your life circumstances may change, but that debt is always there until it gets paid off. So it's wise to know ways you can prevent or minimize issues with your student loans.

These ideas can help you, whether you're in trouble with loans already or planning ahead to prevent such a situation:

1. Borrow only what you need. From a financial standpoint, being a student isn't fun. Everyone gets tired of not having any money. However, a student loan isn't the solution to improving your standard of living.

· Living a challenging life for 4 years beats 10+ years of payments. You may be tempted to borrow an additional few thousand dollars each year to ease the financial pain, but that can be a mistake. Thousands of graduates every year would readily support that statement.

· Consider the school you choose to attend. Is that $40,000-a-year beautiful little liberal arts college worth the expense? Going to a state-funded institution and living at home can save tens of thousands of dollars a year. Choose wisely.

2. Avoid defaulting. If you can't make your payments, the two options available to you are forbearance and deferment. Both options are better for your credit than not making payments and being in default on your loan.

· Forbearance allows you to not make payments for a period of time; the catch is that the interest is still being charged on the account. That means your student loan continues to grow while you're not paying.

· Deferment refers to a suspension of payments, without any additional interest accruing during that period. Obviously, a deferment is preferable, but harder to obtain. See your lender's website for the acceptable circumstances and forms necessary to apply for a deferment.

· Receiving forbearance is relatively easy. Again, look to your lender for the situations that apply and the required forms. Just remember that the loan continues to grow while you're not making payments.

3. Live beneath your means. After completing 4+ years of college, everyone wants that great apartment and a new car. Until those loans are paid off, though, the wise will choose to live a humble lifestyle and forgo the luxuries.

· To many, that sounds like a miserable life for ten years. But nothing could be further from the truth. Yes, it may require a little more thought and planning to entertain yourself on the weekends, but you just got done learning how to think in college. There are lots of enjoyable ways to spend your time that require little to no money.

4. Consolidation. This option allows you to make one monthly payment instead of several by effectively combining multiple loans into a single loan.

· Consolidation also allows for a lower monthly payment, typically by increasing the payment period of the loan. A common consolidation would stretch the normal 10 year loan to 15 years. Although you may be able to receive lower payments, consider how much more you might end up paying over the longer term.

· Consolidation may also result in a lower interest rate, depending on the economy at the time of consolidation.

For many, student loans are an unfortunate but necessary part of obtaining a college education. While these loans can be challenging, they can be managed intelligently and with proper planning.

A little sacrifice now can go a long way to fortifying your financial health. Avoid borrowing more than you need and ending up in default. Try some of the tips above and you may find yourself graduating into a very comfortable lifestyle!

-Tiffany M. Vaughn, CPA

Tiffany Vaughn is a Certified Public Accountant and owner of Cents Savvy, a financial services company. Cents Savvy was founded in 2016 in Belleville, Michigan. Cents Savvy offers financial planning, credit counseling, credit repair, credit rebuilding, credit repair services, tax preparation, small business accounting, debt counseling, tax planning, personal budgeting, personal finance, and insurance services. Cents Savvy’s goal is to become your Top Financial Resource! From saving money for retirement, or getting the biggest tax refund, to building and fixing your credit, Cents Savvy will assist you in achieving your financial goals.