How to Manage Your Student Debt: 8 Tips You Should Know
Student debt can feel overwhelming. With tuition and living expenses rising every year, many students graduate with tens or even hundreds of thousands in loans.
Though daunting, there are strategies you can use to tackle your debt and ease your financial burdens.
These strategies will put you in a better position to pay off your balances and move forward financially.
Key takeaways
- Calculate your total student loan debt so you understand exactly what you owe and to whom. Consolidating can help streamline payments.
- Review the specific terms, interest rates, fees, and grace periods for each of your loans. This info impacts the payoff process.
- Look into employer and federal forgiveness programs that could reduce balances owed. Teachers and nurses may qualify.
- Consider extending repayment timelines if needed. This lowers monthly minimums, though you pay more interest overall.
- Try graduated, income-based, or extended repayment plans to make payments more affordable.
- Use the debt avalanche method to pay off the highest interest-rate loans first. Saves money long-term.
- Defer extra payments if needing temporary relief from financial hardship due to illness, unemployment, etc.
- Explore consolidation and refinancing to combine multiple loans into one payment at a lower average interest rate. It can pay off faster.
8 tips to help you manage your student debt
With U.S. student debt now crossing $1.7 trillion owed among 45 million borrowers, having some handle on minimizing and repaying your balances is key to financial health.
So, here are eight tips that can help you manage your student debt.
1. Calculate your total debt
The first step is gathering details on all your student loans. Make a list of each outstanding balance, who issued it, interest rates, minimum payments, grace periods, and fees.
Having this bird's-eye view helps you strategize the most effective payoff method. You may discover you qualify for employer debt repayment or need to adjust monthly budgets to put more toward balances.
If you have multiple federal or private loans, consolidation also simplifies managing just a single payment at a lower average interest rate.
2. You have to know the loan terms
Carefully review the loan terms for each of your balances owed. This includes grace periods, interest rates, and any associated fees like origination or late charges.
You need to understand when payments start, if interest accrues during school or grace periods, and what default may trigger increased collection fees.
Know that federal loans typically have lower fixed rates and more flexible repayment options than private bank loans.
Also, be clear about any loan forgiveness programs you may qualify for through military service, government employment, or volunteer work.
3. Apply or explore loan debt forgiveness
Speaking of forgiveness programs, research what's available to help reduce your owed debt.
Teachers or nurses may have up to 100% of their federal Perkins or Direct Loans forgiven in return for years of service at Title 1 schools or in community shortage areas.
Public servants, military members, volunteers, and employees of governments and non-profits also have forgiveness options in certain cases.
You usually must make minimum payments while working full-time in qualifying roles. Forgiveness timelines range from 2 to 10+ years.
It's free to submit eligibility applications. At a minimum, you get clarity on what percentage of debts can be erased.
4. Review your loan grace periods
You have to know that the clock starts ticking when making your first payments.
There is usually a 6 month grace period for federal loans after graduating or dropping below half-time enrollment before monthly bills start coming.
Many private student loans have shorter grace periods or require immediate payments while still in school.
Carefully note the deadlines to avoid going into early default or accruing interest fees right away.
Set up autopay through the servicer website once repayment begins so you never miss installments.
5. Look for alternative repayment plans
The standard federal loan repayment timeline is 10 years. Monthly minimums under this base plan are usually higher.
Ask your servicers about alternative options to reduce required payments by extending the payment term. Common options are:
Graduated repayment: Payments start lower, then increase every two years over the course of up to 10 years. Good for new graduates on entry-level incomes.
Pay as You Earn (PAYE): Payment caps at 10% of discretionary monthly income. Any remaining balance is forgiven after 20 year repayment period. Great help for lower-earning graduates.
Extended repayment: Stretches out payments over 25 years for a lower monthly cost, though you pay more overall in interest. Useful temporary relief option.
Income-contingent repayment: Similar to PAYE, payments are based on annual income and the total amount borrowed over the course of 25 years. The unpaid amount is forgiven after that term. Another good option if struggling financially.
6. You can explore the debt avalanche strategy
To maximize how much total interest is paid and accelerate getting out of debt, consider the 'debt avalanche' method.
This is where any extra monthly cash flow gets put toward repaying the individual loan with the highest interest rate first.
Once that balance hits zero, roll that payment amount into the debt with the next highest rate, and so on, until every loan is cleared.
Compared to the 'debt snowball' tactic of paying the smallest balances first, avalanching by interest rate saves substantially on fees over the lifetime of repayment.
This works very well after consolidating multiple loans together into a single balance with a lower blended average rate.
7. Defer payments
If experiencing financial hardship due to medical issues, job loss, or other factors, most federal and private lenders allow applying for temporary payment deferral.
This halts having to make monthly payments (and any related late fees being incurred) for a set period of 6 to 12 months at a time.
You must reapply periodically to extend the deferment if you are still unable to make regular payments.
Just remember interest still accrues, so balances owed keep growing during deferment unless you opt for interest-only repayments.
It's critical to have a plan for eventually restarting normal payments, so you don't fall behind in delinquency.
8. You might want to consider consolidation
If juggling multiple federal or private student loans under differing repayment rules, interest rates, deadlines, etc, consolidation can really simplify life.
It combines all those individual debts into one bigger balance under one servicer at a lower fixed average interest rate. This makes managing just a single monthly bill payment very straightforward.
Shop rates from SoFi, Splash, or aggregation sites like Credible. You can get lower interest costs, saving potentially thousands over the loan terms. Consolidating federal loans later makes you ineligible for federal perks like income-driven repayment options or public service forgiveness programs.
So, run the numbers carefully beforehand.
What happens when you don't pay off your student loan?
If payments are 90 days late, federal loans default into delinquency, hurting your credit score.
After 270+ days without payment, loans default, causing the entire balance to be due immediately. Fees, more interest, wage garnishment, asset seizure, and legal judgments can follow.
Your federal tax refunds or state lottery winnings may also get intercepted. Work with the lender early on if you are having trouble making payments by requesting deferment, reduced payment plans, or forbearance to avoid cascading fees and credit damage.
What Is the fastest way to pay off student debt?
A combination strategy works best for accelerated payoff. First, consolidate higher-interest private bank loans via a refinancing lender like SoFi to secure a lower fixed interest rate.
This stretches out terms but dramatically cuts interest costs. You can use federal income-driven repayment plans only for lower fixed federal loan rates to have up to 100% of any balance forgiven after 20-25 years of regular payments.
Finally, apply any extra monthly cash flow toward paying off the highest-interest debt first via the avalanche method. This organized, multi-prong approach pays off loans faster and cheaper than typical policies.
Are there any student loan repayment calculators?
Yes, many student loan servicer sites like Nelnet, Great Lakes, or FedLoan Servicing have built-in estimators that show repayment timelines and interest costs based on your actual balances owed.
Loan calculators from NerdWallet, Credible, or Investopedia also provide ballpark figures, splitting payments across standard, graduated, level, and income-sensitive plans.
These tools help you choose appropriate repayment options for your budget and the type of loans owed. Some even factor in projections for forgiveness program eligibility and the savings from debt avalanching or early payoff strategies.
