Student loan debt is a major financial weight for millions of Americans. According to the Federal Reserve, the total outstanding student loan debt in the U.S. is over $1.7 trillion. If you have student loans, it is normal to feel overwhelmed and unsure of where to start. Before you make any big decisions about your student loans and repayment plan, it’s important to understand the common pitfalls people fall into. With this knowledge, you can then find the right path forward.
Here are the top 5 mistakes people make when handling student loan debt:
- Ignoring the problem:
The worst thing you can do is bury your head in the sand. Ignoring your student loans won’t make them magically disappear. Unfortunately, they will continue to grow as interest accrues, making the debt even harder to tackle later. - Not exploring all your repayment options:
Don’t assume you are stuck with your original payment plan. The world of student loans offers various repayment options, including income-driven repayment plans, potential loan forgiveness programs, and consolidation. Take some time to understand and compare different plans to see which one aligns best with your financial situation. - Consolidating loans incorrectly:
While consolidating loans can streamline your payments, it is crucial to do it strategically. Consolidating incorrectly could result in a loss of valuable benefits that come with individual loans, such as potential forgiveness options. - Making late payments:
A history of late payments on your student loans will negatively impact your credit score. This can hurt your ability to obtain loans or credit in the future. Late payments might also trigger extra fees and penalties, adding to your debt burden. Which leads to the next common mistake… - Not communicating with your lender:
If you’re struggling to meet your payment deadlines, don’t hide from your lender. Be proactive and contact them to explain your situation. Many lenders are willing to work with borrowers to find temporary solutions like adjusted payment plans or forbearance options.
If you have student loans, remember that you are not alone. When you start to feel overwhelmed, take a step back. Focus on making a good plan and sticking to it and you’ll soon see the light at the end of the tunnel.
Here are some additional tips to help you get started:
- Develop a realistic budget:
Tracking your income and expenses is vital for managing your student loan debt effectively. A budget lets you see your financial reality and identify areas where you could potentially allocate more funds toward your loan payments. - Consider refinancing:
If you have a good credit score, refinancing your student loans could secure a lower interest rate. This can potentially save you a significant amount of money over the duration of your repayment. - Seek guidance:
Student loan repayment can be complex. Don’t hesitate to seek help from qualified financial professionals or student loan counselors. They can provide tailored advice and support as you navigate repayment.
At Kaplan Law Firm, we specialize in student loan law and are here to help you create a plan that works for you. People who work with us often get large amounts of their debt forgiven. Contact us today.
Disclaimer: This is not legal advice. Please consult with a qualified professional before making financial decisions.
