Reduce student loan debt by budgeting, reducing expenses

Reduce student loan debt by budgeting, reducing expenses

The average student loan balance for the college class of 2012 was $29,400, according to the Institute for College Access and Success. Many Arizona residents looking at their student loan debt may become complacent and think they have a lot of time to pay off their debt, but delaying the inevitable may actually compound the problem. Over time, the interest amount increases and for those making minimum payments, the interest payments may even equal the principal amount over time.

Arizona residents with overwhelming debt may be aware they can file for bankruptcy to wipe out most of their debt, but student loan debt does not yet come under bankruptcy's fold, unless the debtor falls under the hardship exception. But debtors struggling to meet their student loan payments might consider filing bankruptcy to discharge other debt so they can free up resources for their student loan.

Delaying debt payment may lead to paying a higher sum back eventually because interest accrues over time. One way Arizona residents can try to make their student loan payments on time and reduce their debt quickly is by creating and sticking to a budget. Cutting back on nonessential expenditures like eating out is one way to reduce other forms of debt to make more money available for paying student debt.

In some circumstances, however, Arizona residents may be in too much debt or have too many payments to make and a budget is simply not the answer. To regain control of their financial life, they can consider filing for personal bankruptcy, either Chapter 7 or 13 depending on their circumstances.

Source: US News, "How to pay off $30,000 of student debt in 3 years," Hal Bundrick, May 5, 2014

Categories