Press Release (ePRNews.com) - Emeryville, Calif. - Mar 05, 2018 - Student loans may feel different from other kinds of debt. But when it comes to paying down debts, it is should be treated similarly. It is, after all, simply borrowed money, and strategies to pay down other kinds of debt can be applied to student loans as well. American Financial Benefits Center (AFBC), a document preparation company that assists its clients in applying and staying enrolled in federal repayment plans, reminds borrowers that student loans are just one part of their debt situation and debt payoff plans should consider the whole debt picture.
Regardless of the type of debt, it’s typically a good idea to create a debt payoff plan. Effectively managing debt can result in a more favorable credit score and perhaps opportunities to build wealth. However, because student loan balances are usually pretty high, emotional responses may create an urgency to pay off that debt as quickly as possible. Although, student loans are just one piece of the debt puzzle, and a more comprehensive approach may be more beneficial in the long run.
“It’s natural to want to pay off student debt first because of the emotional toll it can take on borrowers,” said Sara Molina, Manager at AFBC. “But that might not be the best plan for everyone, and it’s a good idea to look at all options before starting down one path.”
It’s natural to want to pay off student debt first because of the emotional toll it can take on borrowers.
An effective plan often leans on one of two debt payoff strategies: the snowball method and the avalanche method. In both methods, the borrower makes minimum payments on all debts but one. In the snowball method, the borrower focuses on the lowest balance debt and pays as much as they can toward that debt until it is gone; in the avalanche method, he or she focuses on the highest interest rate debt. With each debt payoff, the borrower refocuses on the next debt, depending on the chosen method.
Both of those approaches require a comprehensive look at all types of debt. Therefore, it doesn’t necessarily make sense to treat student loans differently. However, one aspect that sets federal student loans apart may benefit a debt payoff strategy. Income-driven repayment plans offered by the Department of Education base minimum payment amounts on income and family size, so they have the potential to lower payments and free up some more funds to go toward paying off other debts.
“AFBC clients who apply for and become enrolled in an IDR are usually in a good position to enact a debt payoff plan because they are benefiting from the reduced IDR payments,” said Molina. “IDRs may also reduce the emotional stress borrowers have regarding their student debt by making the payments more affordable. Overall, we hope our clients feel like they are in a good financial position to both stay current on their student loans and focus on working toward other financial goals.”
About American Financial Benefits Center
American Financial Benefits Center is a document preparation company that helps clients apply for federal student loan repayment plans that fit their personal financial and student loan situation. Through its strict customer service guidelines the company strives for the highest levels of honesty and integrity.
AFBC is a member of the Association for Student Loan Relief (AFSLR), and each representative on the phone has received the Certified Student Loan Professional certification through the International Association of Professional Debt Arbitrators (IAPDA).
To learn more about American Financial Benefits Center, please contact:
American Financial Benefits Center
1900 Powell Street #600
Emeryville, CA 94608
American Financial Benefits Center