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Congratulations — you’ve graduated from college. Now, it’s time to get a job and enter the real world. Hopefully, you got a good job because those student loans will be coming at you fast. Fortunately, there are some tips from experts to help you pay off that debt. Here is 15 Ways to Take Control of Your Student Loan Debt.
1. Calculate Your Total Debt
If you’re like me, you might have a few federal and private student loans when you graduate college. The first thing you want to do is add up those totals so you know how much you owe. It is a good start for you to set up a plan to start paying it off or seek a consolidation loan.
2. Set a Budget
After you have the total of your loans, you’ll need to know the monthly payment. Afterward, you must set a monthly budget to ensure you can afford the payments. This will help you manage your finances and keep you honest with your payback plan.
3. Sacrifice Spending
As a young college graduate on a tight budget, it’s important to understand you might have to sacrifice some spending and experiences to take care of your finances. You might have to skip a night out with friends or that new gadget you have had your eye on. Welcome to adulthood. You now have responsibilities, and it’s not always fun.
4. Know the Terms
If you do have multiple loans, each one might have different terms. One might have a higher interest rate or different dates to be repaid. Understanding these dates and rates is essential to start your budget. You might want to allocate more funds to loans with higher interest rates. Make sure you know the terms backward and forward. You don’t want to incur any penalties or late fees.
5. Know the Grace Period
All your loans will give you a buffer from your graduation date until you need to repay them. The advice given to me when I graduated was to start paying them off immediately if I could. These loans can have high-interest rates, so paying them down before you need to can give you a giant head start toward paying them off.
6. Look into Loan Forgiveness
It is wise to look into circumstances that allow you to be forgiven your student loan debts. Factors such as filing for bankruptcy, school closures, a medical emergency, or other uncontrollable factors may make you eligible for the loan forgiveness programs. Also, if you are a teacher or work in the public service sector, you may apply for full or partial loan forgiveness.
7. Alternative Payment Plans
There are many creative ways to help you manage your student loans. You can reach out to your loan servicer to explore these options. Some programs offer extensions like spreading your payments over 20 years instead of the usual ten years. Others provide plans to change your payments to match your income level. A lower income will allow you to pay a lower percentage of your debt every month. If you’re feeling overwhelmed, these are some excellent resources to help guide you to paying them off.
8. Consolidate Loans
Consolidating your many loans might help you keep track of your payments because you will only have one monthly payment. Check how this will factor into interest rates and the number of payments. A longer pay period might mean more money paid to interest but a lower monthly payment. If that’s a better option, take the lower monthly payment and pay more during the months when you can afford it.
9. Use Auto-Pay
If you can be sure the funds are in your account on the due date every month, sign up for auto-pay. If your loan is part of the Federal Direct Loan Program, you can get a .25% discount. That’s saving money without doing anything.
10. Pay Down Principal
As I mentioned earlier, paying more than the minimum amount will lower the principal on your loan much faster. Lower those pesky interest rates by paying them off before they accrue to an amount you’ll never pay. Ensure the extra payments go directly towards the principal by contacting your loan provider.
11. Defer Payments
If you find yourself unemployed, you can ask your loan provider to defer payments for a short time. You can save interest rates during this hardship. This can help you get by, but I recommend deferring payments only if needed. If they keep the interest rate, your balance will continue to grow.
12. Refinance
If you have a good credit score, you can get a loan with a lower rate and refinance your balance. A lower interest rate equals less money out of your pocket. Work on building your credit during the first year of payback, and then start researching loans with different rates. You may also ask a family member to cosign for you for an even better rate.
13. Tax Deductions
When it’s time to pay your taxes at the end of the year, know that the government allows you to deduct the taxes for interest you paid on your loans. You can deduct up to $2,500 depending on your adjusted gross income. Pro tip: take the money you get back from those deductions and put it directly toward the principal on your loan.
14. Employer Repayment Assistance
Check to see if your employer offers any type of repayment assistance programs. Some companies can contribute up to $5,250 toward repayment assistance. This is a nontaxable benefit for the employee. The employer can deduct the expenses, which is a win-win for everyone.
15. Get a Side Gig
If you are willing to sacrifice a couple of nights and maybe a weekend day, get a side gig, or keep your part-time college job, it might be a good idea for some extra income. If you get a part-time job, take all the money you make at the job and apply it to the loan’s principal. You might not want to give up some of your free time, but you’ll love the money you’ll save in the long run.
Source: Investopedia
