Although Americans are repeatedly told to avoid debt, many have all kinds of debt – credit cards, auto loans and student loans. When people hold various types of debt, they often come up with a plan to manage them all.
AFBC Manager Sara Molina said it’s a bit counterproductive to gain control over one debt but not another. If repaying student loan debt means missing payments for home, auto or credit cards, something must change.
There are multiple ways in which a person should deal with their debt and debt payoff plans. Any person who needs help doing this should seek out a financial expert to assist them. The biggest aspect of any plan is that debt accounts need to be current to attain the monthly minimum amounts. When an expense increases, the person will need to address it.
While it’s possible to lower one’s monthly expenses, it means changing their lifestyle. They can opt to eat in more often, combine phone bills or go to another cheaper plan. They can refinance their car loans and have credit card balances moved to another card to take advantage of the lower interest rates. People should not use credit cards unless they can effectively pay off the charges and use rewards to help them meet their goals.
Students who borrow money from the federal government may be able to use the income-driven repayment plan to lower their monthly payment. A person is eligible for the IDR if they meet the following criteria:
- Income is too low
- Payments are excessively high
- Family is large
The IDR will calculate the payments based on two key factors – family size and income. For some people, the payments may be nothing. Money that’s available from one source can go to another to pay off debt or savings.
Molina said it’s imperative to use the extra money to reduce bills to pay others off or boost their savings. She said it might feel like extra money, but people should not treat it as such.