Saturday, December 12, 2009

Know Your Student Loan, One Step to Financial Freedom

Some people treat student debt like the plague and make no special effort to pay bills right away or at all. The good news is that the number of those who elect to ignore their student loan debt is declining. Educators attribute that decline to an improved U.S. economy in the 1990s and an improved awareness on the part of loan recipients of the importance of paying off their student loan debts.

Obviously, student loan borrowers are taking their debt more seriously. And people are beginning to understand that knowledge is power and that the fastest way to pay off student loans is for borrowers to face their loans head on and know what they’re up against.

This is a highly significant occurrence. By knowing your debt and understanding how it impacts your financial life, your chances of eliminating that fiscal albatross around your neck increases exponentially. But what, exactly, does “knowing your debt” mean?

For starters, it means knowing how much you owe on your loan. If you owe $8,000, then, if nothing else, you know where you stand. It seems like a simple concept, but some people can’t be bothered about their debt amounts. They’re too busy starting their careers or tackling other, more appealing, fiscal responsibilities such as buying a new Jeep or grabbing a vacation rental on the beach for the summer. These people are in the highest danger of defaulting on their student loans, simply because, for whatever reason, they stopped paying attention to their loans.

Don’t be like that. Know your loan. Know its terms, its payment schedules, its repayment options. Know that if you make higher monthly payments you can pay the loan off more quickly. Know who your lender is and where you can reach them. Know that if you move, you need to contact your lender and let them know your new address. Hey, young people move all the time. They get jobs in different cities or decide that they want to live in San Francisco or Boston at least one time in their lives and up and do so.

Knowing your debt also means knowing what to do if you can’t make a monthly payment for some reason. Lenders are usually fairly gracious about this, as long as you let them know you won’t be paying and when they can expect the next payment.

Keeping your lender in the loop is a huge part of knowing your debt. Closing them out or ignoring them will only lead to complications and possibly default. And if that happens, good luck landing that new brownstone apartment in Haight-Asbury or Harvard Square.

Above all, knowing your debt means reading and understanding all the correspondence you’ll receive from your lending institution. Yes, the language lenders use in their statements reads like the Dead Sea Scrolls. But read it anyway. Remember that it’s all part of knowing your debt.

And knowing your debt could mean the difference between financial freedom down the road or financial fiasco.

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