Student Loan Dodgers

When does accelerating debt payments make sense? As it turns out, most of the time. If you have accumulated debt, you will pay interest on the debt as long as you hold it. When you shorten the time you hold the debt, you reduce the overall cost of the loan or debt.

Accelerating payments can help reduce the overall cost of an obligation. In most cases, your initial monthly payments are applied to the interest you owe on your principal sum. Very little of the money you borrowed is actually repaid. As you pay down your debt, more of your payment is applied to your principal sum, which in turn reduces your interest.

To accelerate a debt payment, pay the full monthly amount. Your monthly payment will be applied to your debt as usual. Make an additional payment of some amount - it doesn’t have to be a full payment – and the additional amount will be applied directly to your principal balance. Your extra payments will begin to reduce the principal sum on which interest can be charged. Regular extra payments could cut months or years off of your debt repayment.

Reducing your overall debt by making extra payments makes sense. If you owe multiple lenders, start applying extra payments to the debt whose interest rate is the highest. Once you’ve repaid the highest-rate debt, shift the full amount you were paying on the retired debt to the debt with the next highest interest rate. If you apply this same payment to your next debt, you can quickly reduce it to zero as well. Be sure to make the monthly payment on all of your debts while you’re reducing your balances due.

Using this method, you don’t spend any additional money to pay down your debts, but you concentrate it where it will provide the most benefit. Work your way through all of your debts, saving your lowest interest rate obligations for last.

Some people also choose to apply any raises or tax refunds they get toward debt reduction. This approach means that you maintain your standard of living, but you retire your debts faster than you would by making payments only according to the schedule.

Sometimes you just get the urge to spend, and if you’re used to following through on that, you can soon find yourself in deep financial trouble. If you’re a big-time spender, try developing a set of anti-spending habits to tide you over until the urge passes.

When you feel like going out shopping, go to the recreation building instead. Work out, take a walk, ride a bike, or do whatever physical activity helps get you through the urge to spend.

Reading is a great way to distract yourself and work through the urge to spend. Watch a movie or TV program, listen to a hockey game or some other sporting event. If you have to, tape a few games to watch for just these occasions. Go to the library and check out the newspapers from home or from other cities that interest you.

Invite a friend over and watch a movie. If there’s a dollar theater in town, check out a movie you may have missed at the first-run theater, or see a movie you particularly liked a second time.

Check out the events on campus. Often, you can find an interesting lecture, movie screening, or event that you can attend for free.

Balance your checkbook. Sometimes, taking a realistic look at your financial circumstances helps diminish the urge to spend.

Go to an online gaming site and play games. Many times, you can play single-player or networked games free of charge. If you have access to the Internet, go check out Second Life for awhile. Try to meet someone interesting.

Develop a set of activities you can turn to when you feel the need to spend money that you should be saving for other things. If you can intervene on the habit often enough, you’ll not only save money, but you’ll also retrain yourself to avoid recreational spending.

When you leave college with a mountain of debt, it’s easy to consider filing for bankruptcy as a way to get out from under some of your obligations. Students may not realize, however, the impact that bankruptcy has on their credit.

Bankruptcy laws have changed in the United States and it is now more difficult for individuals to declare personal bankruptcy than it was in the past. Bankruptcy is a declaration that you do not have, nor do you expect to accumulate, sufficient assets to repay your obligations. People declare bankruptcies for many reasons. Unexpected health crises, divorce, death of a spouse, failure of a personal business, gambling losses, employment loss and unchecked spending are some of the more common reasons people choose to declare bankruptcy.

Certain types of debt are not normally dischargeable through bankruptcy. Adverse court judgments, delinquent taxes and student loan debt are examples of obligations that cannot be erased by a declaration of bankruptcy. Regardless of whether the student loan debt is federally subsidized, unsubsidized or entirely private, declaring bankruptcy will have no impact on your student loan debts. When everything is said and done, you’ll still owe just as much as you did before you declared bankruptcy.

You may be tempted to declare bankruptcy early in your career, using the rationalization that you’ll recover more quickly from your past financial misdeeds if you start with a clean slate. This isn’t true. A declaration of bankruptcy will damage your ability to get car loans, mortgages and in some cases, a good job for as many as 10 years after you file. Never enter into a declaration of bankruptcy lightly. Ordinary adverse information (and good information, too) stays on your credit report for seven years. You’ll recover more quickly if you take your lumps and repay your debts than you will if you declare bankruptcy. In the process, you’ll rebuild your damaged credit rating, too.

As a side note, debt repayment is really the only way to repair a damaged credit rating. Regardless of what someone promises you, there’s no easy way to “fix” bad credit, except by repaying your debts and developing financially responsible spending habits. Do not give in to the temptation of paying someone to fix your credit rating for you. The only person who can fix your bad credit is you!

Making a budget is easy. Sticking to a budget is hard. If you’re new to budgeting, one of the most common ways you can get knocked off track is by underestimating how much money you’ll need for your expenses.

Unplanned and under-planned expenses can wreak havoc with your spending plan. If you find that your budget just isn’t working, and you have some savings to play with, track where your money is going. If you’ve budgeted $15 per week for entertainment, but consistently spend $30, you’ll either need to revise your definition of “entertainment” or you’ll need to increase your entertainment budget to $30 per week.

Most students have a limited amount of money to spend each month, so increasing the budget for one thing means taking money away from another spending priority. For the most part, budgeting is about making choices, so figure out what’s most important to you and budget accordingly.

If you still can’t make ends meet after you’ve cut or reduced your expenditures, your only other option is to increase your income. You may need to take a part-time job, pick up extra hours at work, or find ways to cover your expenses. Locating grants to help pay for your books, for example, may free up money in your budget for other things and prevent your from having to resort to student loans.

No one gets the hang of budgeting right away, and most people overspend themselves when they’re first starting out. Keep receipts, study your expenditures and avoid your temptations as much as possible while you’re attempting to establish a workable spending plan. Refine your budget as often as you need to while you learn to balance your income and expenses.

One strategy some students employ to reduce the overall cost of a higher education is transferring credit from another institution, often a community college or junior college. The first two years of many four-year programs are filled with general degree requirements. Math, science, English, foreign language, health, public speaking, social science, elective and basic computer classes that qualify for transfer are offered by community and junior colleges at a much lower per-credit-hour cost than those offered at a four-year university.

This is a great strategy for students who are concerned that their academic performance may suffer at a larger institution. Community colleges are filled with adult students of all ages. Smaller class sizes and better out-of-class availability of instructors mean that students can receive a richer, more productive academic experience in a two-year setting, while still making progress toward a four-year degree.

Additionally, completing the first two years at a community college offers students the opportunity to live at home and work part-time while still attending school. Living at home can save thousands of dollars in room-and-board costs if Mom and Dad are amenable to the arrangement. Combined with the decreased tuition at a community college, this approach can significantly reduce the cost of a higher education.

If you plan your academic program carefully, you can graduate from the community college with a two-year general education degree, or a two-year degree that complements your major field of study at the four-year institution of your choice. The combination of your two degrees may make you more valuable to prospective employers once you finish your bachelor’s degree.

Many colleges and universities guarantee housing for freshmen, and therefore restrict the size of the incoming class. You may find that it’s much easier to transfer into the university of your choice as a junior, instead of competing for a freshman spot. You’ll end up with a bachelor’s degree from the school of your choice and will still have plenty of opportunity to enjoy the campus life.

For some students, the economic realities of higher education mean working at least part-time while going to school. A part-time job offers the ability to earn extra money for tuition or living expenses. But can you really work and go to school at the same time?

Most decidedly, yes! Working a part time job can consume as many as 15-20 hours per week. It’s important, therefore, to make the most of your working time. Minimum wage jobs tend to require a flexible schedule, and the shifts are relatively short. Also, don’t assume that the only jobs you’re “qualified” for are minimum wage jobs. Plenty of entry-level work will get you more than the minimum wage. There’s yet another reason to avoid minimum wage jobs: you will maximize the amount of money you earn for the time you have available if you can avoid minimum wage work.

If you plan to work part-time, you’ll need to get serious about scheduling time to complete your studies and class assignments. Schedule all of your classes on the same days of the week, even if it means that you’re in the classroom for six or eight hours on those days. If you can go to classes on Mondays, Wednesdays and Fridays, you can work on Tuesdays and Thursdays. You’ll find better-paying part-time opportunities if you can regularly devote a two full eight-hour days per week to work. You’ll also have a better, more meaningful work experience that contributes to your education. You’ll still have evenings and weekends to complete your school assignments, and spend time with your friends.

Choose the most interesting part-time opportunities you can find. Look for jobs that will enhance your studies, work skills or that will provide meaningful experiences once you are ready to work full-time. Look at a part-time job as a non-credit co-op experience and it will become more than just a paycheck for you.

Don’t expect to be given a corner office, but there are some important benefits to working your way through college. If nothing else, part-time work gives you the chance to make contacts, earn positive references and learn how to work well with others in a business environment.