Time flies by so quickly! Just a few months ago you were attending your college graduation, and now the time has come to start repaying your student loans.
When scholarships or a part-time job just isn’t enough to cover the cost of tuition, you may have to resort to assistance in the form of loans. Student loans can be tricky, especially if you don’t know the facts behind them.
Here are a few things that you should know when it comes to paying off your student loans.
- Student loan interest is tax deductible. If you paid student loan interest on a qualifying loan last year, meet certain income requirements, attended an eligible institution as at least a half-time student, and started paying on your loans within a reasonable timeframe after the loan was taken out, you may qualify for the student loan interest deduction. You can deduct up to $2,500 in loan interest on your taxes if the above conditions are met, as outlined on the IRS website.
- Direct debit lowers the interest rate. Automatically having your student loan payments deducted from your bank account lowers your interest rate and saves you from having to worry about making your payment on time every month.
- Loan payments can be deferred under certain conditions. Deferment is when you delay your student loans and can apply in certain situations, including furthering your education or if you are an active military member during a global or national emergency. To request a deferment, you have to contact your lender directly.
- Lenders will often lower payments if you are facing financial hardship. If deferment is not an option for you, lenders may offer you forbearance, allowing you to stop or lower your loan payments for 12 months while still accruing interest. See if you are eligible for this option.
- Teachers are often exempt from repaying their loans through a specific program. The Teacher Loan Forgiveness Program allows teachers who work 5 years in schools in low-income areas to be forgiven for up to $17,500 of their student loans. This only applies to Direct Subsidized and Unsubsidized loans as well as Subsidized and Unsubsidized Federal Stafford loans. PLUS loans are not eligible. To see if you qualify, check out the Federal Student Aid website.
Student loans are not as bad as you think. Having student loans in your name and making your payments on time shows that you can handle a large amount of debt responsibly. Over time, your on-time payments will contribute to your credit score – building to your payment history, total amounts owed, and credit history.
So when you eventually purchase your first post-college car or residence, you won’t be looked over due to your ability to manage your payments wisely. Keep in mind that you never want to be late on a payment or default on a loan as this can completely ruin your credit score and may be hard to recover from.
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