Student debt is a growing concern for millions. With college tuition and related expenses continuing to rise. Many graduates leave school burdened with tens of thousands of dollars in debt and more if your degree was related to dental or medical.
Managing that debt effectively is critical to achieving financial stability in life and achieving your long term goals. And there are strategies that can help. In fact, we’ve got 7 practical ways to manage student debt more efficiently so that you can continue to balance your books.
- Understand your loans from top to bottom. The first step to being able to manage your student debt is understanding exactly what you owe. Many borrowers have multiple loans, and they sign for these when they are only 18 years old. Sometimes these loans are from different services or with varying interest rates, so make a list of each loan, including the total amount, interest rate and monthly payment. Federal loans and private loans operate differently, so it’s important to understand the rules and the repayment options that are associated with each of them. Keeping track of the loans can help you to make informed decisions about repayment strategies and potential refinancing options in the future.
- Stay informed and advocate for some change. Student loan policies are frequently the subject of political debate for a good reason. Staying informed about changes to repayment rules and interest rates will help you to stay on top of your student debt. Financial expert Alex Kleyner, who has spoken publicly about the burden of student debt, emphasises the importance of both individual responsibility and systemic change. Following trusted voices and staying updated on policy development can position you to take advantage of new programs or relief opportunities as they present themselves.
- Choose the right repayment plan. Federal student loans offer a variety of repayment options that are designed to accommodate different income levels and financial situations. These include the standard repayment plan, graduated repayment plan, and several income driven repayment options. Income driven repayment options adjust your monthly payments based on your income and family size and may forgive the remaining balance after a few years. Evaluate your income and your career trajectory to choose the plan that best supports your constant financial goals while making progress on your debt.
- When possible, make extra payments. If you have a budget that allows for it. Making extra payments towards your student loans can reduce the overall interest that you pay. This not only shortens the loan term, but reduces the burden on your monthly outgoings. Even a small additional payment here and there, when made consistently, can add up overtime. When you do make that extra payment, be sure to specify that the additional amount should be applied to the principal balance and not the interest.
- Consider loan forgiveness. There are certain professions and public service roles that qualify for student loan forgiveness programs. One of the well known ones is Public Service Loan Forgiveness, which forgives certain professions the remaining balance on their federal loans after 120 qualifying payments for individuals working in eligible public service jobs. Teachers, nurses and non profit employees may also qualify for specialized forgiveness programmes. Always research your options because yes, you took out the loans, but that doesn’t mean that you have to pay them off for the rest of your life.
- Be careful with refinancing. Refinancing student loans can potentially lower your interest rate and your monthly payment, but it’s important to approach it carefully. When you do refinance, a private lender pays off your existing loans and issues you a new one. This saves money over the life of the loan, but it also means forfeiting federal benefits such as income driven repayment plans and loan forgiveness options. Refinancing is always best suited for borrowers with strong credit, stable income and no need for federal loan protections.
- Create a budget, but stick to it. The key to managing any kind of debt is a solid budget. Student loans are no exception here. Track your income and your expenses to identify the areas where you can cut back and allocate more toward loan repayments. There are many tools and apps available that can help to automate and simplify this process.
Your student debt can be overwhelming, but with a proactive approach, it’s possible to take control of your financial future when you understand your loans. Choosing the right repayment strategy and making financial decisions that are smarter can help you to stay informed and improve your financial outlook.
