Drowning in Student Loan Payments? Here’s Why You’re Paying More Than You Should Be

Most people go to college to make more money. Yet, thanks to rising tuition rates, depressed job markets, and inflated living expenses, many Americans now find themselves crushed by the loans they once thought would enable them to achieve financial security. As bad as making these payments can be, the alternative seems worse: late payments on federal student loans remain on your credit reports longer than late payments on private debt.

So, what are your options when you can’t afford to make a payment, but can’t afford to miss it, either? The two federal programs you need to know about are: Consolidation and Income-Driven Repayment.

Consolidation is the first step for borrowers struggling with multiple loans. This government program allows borrowers to combine two or more loans into a single new loan with a federally guaranteed fixed-interest rate, based on the average rates of the consolidated loans. Under the right circumstances, that fixed-interest rate can result in massive long-term savings, and the monthly payment is typically lower than the original payments. As an added benefit, the original loans continue to report on your credit as paid debt in good standing, providing a big boost to your credit scores.

Income-Driven Repayment (IDR) is another federal program that can be a lifesaver if you’re struggling with student debt. Specifically designed to give borrowers access to monthly payments they can actually afford, IDR plans calculate rates based on the individual’s income, expenses, and dependents. For unemployed borrowers, or underemployed borrowers with dependents, these payments can be as low as $0 a month! The best part? Each IDR plan comes with a fixed payoff term, ranging from 120 to 300 monthly payments. Once the borrower has reached their payoff term, the remaining debt is completely forgiven.

Thanks to these two powerful tools, you don’t have to break the bank each month paying off your student loans. If you want more information, or you need a little help getting started, call the experts at Fix Your Credit Consulting, and they’ll put you on the right track to manageable debt.