Thursday, July 24, 2008

Planning Today for a Debt Free Future

With tuition prices of most colleges and universities steadily on the rise, it is not surprising that a large majority of students are relying on both private and federal loans to supplement the funding of their educations. However, thinking about the debt that you are incurring now, and making a viable plan to pay it off in the future, can greatly reduce the stress and financial burdens that can come along with taking out student loans.

Purdue University in Indiana’s weekly publication, The Exponent, is just one of countless student-run newspapers that has been addressing the topic of student loan debt more and more in recent months, offering ways to help decrease costs. The most common and helpful ways to reduce your debt amount while in school include:

  • carefully planning out expenses and adhering to a budget
  • taking advantage of work study and/or steady employment
  • opening a savings account and/or consolidating loans to reduce interest rates
  • making small monthly payments, if possible

Financial instability for many students after graduation stems from the idea that they do not need to think or be concerned about the debt they are incurring while in school. However, financial aid director of Purdue University, Joyce Hall, as well as countless other higher education officials across the nation, have the student’s best interests in mind, and are urging them to think now about working towards a debt free future. "Pay your loans off as soon as possible after graduation. Before you get a new car, computer or house, pay your student loans off. Pay them off as fast as you can so you can begin saving for the rest of your life," Hall stated to Exponent reporter Spencer Morris in a recent issue.

At Fynanz, we require a $25 monthly “good faith payment” for those students who opt to defer payments. The purpose of this is to instill a sense of responsibility early on by the borrowers. This can make them less likely to default in the future, if every month they are reminded that their loan is active, in existence, and accruing interest. In addition, lenders might feel more comfortable knowing that the borrowers are showing financial stability and responsibility. Furthermore, this process will help decrease the amount of interest students have to pay over time. This is why we also reward our borrowers by deducting 1% off your interest rate after 10% of the loan principal has been repaid and release your cosigner after 24 on-time payments.

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