Falling behind on student loan payments can be a difficult experience for many college graduates. Many find themselves struggling to keep up with the sometimes overwhelming economic burden of their student loan debt. Fortunately, income-driven repayment programs can be a powerful tool to help make sure student loan payments are manageable. But it’s important to remember that these programs come with their own risks, especially if you make a key mistake. In this article, we'll explore what happens if you make the wrong move with an income-driven student loan repayment plan. Don’t miss out on the advice that can help you avoid a dire financial situation – read on if you want to know how to get the most out of your income-driven loan repayment plan.
1. Avoid Costly Financial Aid Mistakes
It’s no secret that applying for a financial aid package can be a confusing and overwhelmingly complex task. It’s important to avoid costly mistakes which can result in missing out on the aid you need for school. Here are a few guidelines to help you stay one step ahead of the financial aid game:
- Collect all required documents: Many students miss out on a financial aid package because of the lengthy application process. Before beginning the application, make sure to collect all relevant documents such as your tax information, bank statements, and previous year’s school transcripts.
- Understand deadlines: Take the time to read up on all deadlines related to the application process. Different states and schools may have different deadlines and requirements. Don't miss out because you didn't double-check.
Although financial aid can help alleviate some of the stress of tuition payments, it is important to understand the guidelines and processes of each program. Don’t be afraid to reach out for assistance when needed. Taking extra steps to prepare and become familiar with the financial aid process can save you from making costly and potentially harmful mistakes.
2. Don't Underestimate the Power of Re-Certifying for an Income-Driven Repayment Plan
Re-certifying for an Income-Driven Repayment Plan is not a once and done event. It is a process that needs to happen yearly. It can be easy to overlook, but it’s an important part of managing your student loan debt. Re-certifying can bring a variety of benefits:
- Lower Monthly Payments: Your monthly payment may be adjusted lower depending on your current income.
- Forgive Unpaid Balances: If your payment never covers your interest, it can still be forgiven after 20 or 25 years.
- Calm Collection Efforts: Your loans can be transferred to an Income-Drive Repayment Plan to stop collection actions on past due payments.
It’s important to make sure you give yourself plenty of time to complete the re-certification process. Start by gathering your income information to make sure you can provide accurate details. Keep an eye out for potential changes that could impact your payment and be proactive in making sure your information is up to date.
3. Stay on Top of Your Income Changes
Staying informed of income changes is essential to financial success. As a small business owner, staying aware of any changes in the economic climate and how it will affect your income is part of managing cash flow and budgeting.
Steps for Staying On Top of Your Income Changes:
- Periodically review your financial records: compare your income from different sources against your business expenses.
- Evaluate and review taxes related to your income: look for potential savings and tax deductions.
- Monitor account receivables: prompt customers and clients with payment reminders.
- Balance income with expenses: plan for periods when expenses are higher than income.
Other income sources need to be managed as well. Investments, bonuses, retirement contributions and other payouts should all be tracked and monitored. Organizing this information regularly will save you time and headaches down the road.
4. Don't Forget to Boost Your Loan Balances When Your Income Rises
When your income rises, there's no better time to enhance your financial stability. By boosting your loan payments, you can make a big difference in your long-term financial goals. Here are a few tips to help you get the most out of your financial growth:
- Reduce the number of payments: One way to boost your loan payments is to reduce the number of payments you make each month. This can free up extra funds for more rapid loan balance reduction.
- Increase your payment amounts: Increasing the amount of your payments can also go a long way towards repaying your loan sooner. Even if it’s only a small amount, this can help you pay down the loan more quickly and save money on interest over the long run.
By showing fiscal responsibility and taking advantage of your increasing income, you can get the loan balance down to manageable levels in no time at all. You can also keep track of your progress by using a simple financial management tool to help you make smarter decisions with your finances. The bottom line is that income-driven student loan repayment programs are invaluable for those with high student loan debt who are looking for a way to reduce their payments. However, if you choose to use one of these programs, be sure to stay informed and follow the guidelines to avoid costly mistakes. With the right guidance, you can be confident and secure in your decision to pursue an income-driven student loan repayment plan.
