Recently, we discussed the conditions under which it may be possible to discharge student loan debt in bankruptcy. As we saw, discharging student debt in bankruptcy is very difficult. The vast majority of student loan debtors should not consider bankruptcy as a viable option to resolving their debt. A few people who meet the strict “undue hardship” standard may be successful, but those are in the minority. For the remainder of debtors, the best course is to develop workable strategies for paying off the debt. Paying off student loans doesn’t have to be as difficult as some make it out to be. Of course, dealing with debt is never fun, but it’s possible to live well and manage your debt effectively.
In this post, we will discuss a few strategies for paying off student loan debt. This advice will help you pay off your debt in a swift manner. And, if you follow these tips, you will be able to cope with your debt more effectively. Perhaps the worst kind of debt is any debt which dramatically interferes with your lifestyle. Sadly, student loan debt tends to fall into this category more than any other type of debt. Hopefully, this counsel can at least lighten the burden of student loan debt for current debtors.
Register for Income-Based Repayment (IBR)
One strategy for coping with student loan debt is to register for “income-based repayment,” or IBR. IBR can be a highly useful way to manage student loans effectively. Essentially, IBR puts a cap on your monthly payment based on your current income. The cap is set at 10% of your monthly “disposable income.” This cap is designed to reflect the other bills and expenses that student loan debtors have to grapple with. This makes perfect sense. Even if a person is saddled with a large amount of debt, he or she will still have other obligations. The IBR system prevents student debt from interfering too heavily with a given debtor’s lifestyle.
One odd thing about the IBR is that only a small percentage of student debtors utilize it. This is probably due to a simple lack of knowledge. Most student debtors are unaware of the IBR. And, among those who are aware, most probably assume that it’s overly complicated. The truth, however, is that applying for the IBR is quite straightforward. Debtors simply have to go online and fill out an application and then provide documentation to substantiate their income. The whole process doesn’t require excessive time or energy. Though the IBR will not help debtors accelerate the repayment process, it will contribute toward a better lifestyle. The IBR will prevent payments from becoming unmanageable and having a negative impact on one’s well being.
Create a Budget
Whether debtors choose to utilize the IBR or not, every debtor should develop a budget in order to manage their income. Student debt tends to become troublesome when debtors fail to create a predictable fiscal routine. Create a spreadsheet which keeps close track of your fixed income and fixed expenses. Also take into account any non-recurring income and expenses as well. When you calculate your expenses, highlight or place emphasis on your monthly student loan payment. It may help to create a separate bank account just to make deposits to cover these payments. If you track your income and expenses in this way, you won’t be hit with any unpleasant surprises. Paying off your student loan debt will simply become another part of your larger routine. The more organized you are, the more you’ll be able to balance your payments with your entire lifestyle.
Minimize Frivolous Expenditures
Cutting out frivolous expenditures is not the most favored piece of counsel for debtors, but it’s very useful. Though paying off debt can help your credit, it’s always a good idea to eliminate debt as quickly as possible. Toward this end, debtors should make an effort to avoid unnecessary expenditures to accelerate repayment. In some ways, frivolous expenditures are the worst kind of expenditures because they seem small but add up quickly. With large purchases, such as cars or furniture, you know exactly the impact that such purchases will have. Frivolous expenditures, on the other hand, tend to sneak up and cause all sorts of problems. Hence, one of the best habits a student loan debtor can make is cutting down on these expenditures.
Breaking spending habits is far from easy. This applies doubly for small purchases. It’s all too easy to keep buying coffee from your local Starbucks, or last minute items at the supermarket. Little items can be the most addicting. But if you drop this habit, you can direct more of your funds toward your loans. And in the end, this will give you the greatest reward.
Call For Assistance
Student loan debt is a special kind of financial burden. Student loan debt is one of just a few things which cannot ordinarily be discharged via bankruptcy. But, though this is the case, student debtors can still build credit and enjoy good lifestyles. Here at Mackay, Caswell & Callahan, P.C., we know all about the issues people face while struggling to pay off student loans. If you think you may be eligible for a discharge, don’t hesitate to reach out to us. Or, if you have another tax matter, contact our top New York City tax attorneys for top notch counsel. We will review your case and provide excellent service as soon as we receive your call!