If you are like many millennials, you have student debt. In fact, according to the Federal Reserve, Americans have $1.56 trillion of outstanding student loan debt. Student loans have become an epidemic.
Despite the high amounts of student debt, there are plenty of solutions to aid in your repayment plan. So, if you’re bogged down with your student loans, here is your complete guide for paying off your student debt:
Understand what you owe
Before you make a plan to repay your debt, you need to understand exactly what and who you owe. Take some time to review all of your accounts. Log into each of your accounts and find your most recent statement. If you cannot find your statement, reach out to your lender for details. Your lender will be able to point you in the right direction.
If you are unsure of what you owe, you can check the National Student Loan Data System.
Create a spreadsheet
Once you have a running total of all of your student loans, you will want to create a spreadsheet to keep track all of your debt. To help keep you organized, you will want your spreadsheet to include:
- The amount you owe
- The interest rate for each loan
- Your lender
- Your login credentials for each loan
- The due date for payment
- Monthly payment amount
You can use your spreadsheet to keep a running record of your repayment. It may be motivating to see your student loan amount decrease over time.
Research repayment options
Understanding your repayment options will help you save money. If you are just starting your career, your student loan monthly payment may be more than you can afford. But not to worry, there are repayment options to help with your financial situation.
Federal student loans
If you have federal student loans, you can visit the Federal Student Aid website for details. There are many different repayment options to help assist you with repaying your student loans.
For example, you can apply for the Income-Based Repayment Plan. With this plan, your payment is based on your income. Your payment will be either 10%-15% of your discretionary income. Selecting this plan may minimize your monthly payment so it will fit within your budget.
Private student loans
If you have private student loans, you may want to consider deferring or forbearing your loans. With loan deferment, you can temporarily postpone payments, whereas with loan forbearance you can postpone your payments for a designated amount of time.
Every private lender has different terms and requirements for their programs. Reach out to your lender directly to determine which option may be right for you.
Set up auto payments
Even if there are additional repayment options you qualify for, you may want to consider setting up autopayments for each of your loans. This is a great way to eliminate the hassle of your monthly payments. You will no longer have to worry about making payments on time if it’s automatically deducted from your account.
Consider paying off highest interest rates first
Once you establish auto payments on all of your existing loans, you may want to put any additional cash toward loans with higher interest rates. The higher your interest, the more you will end up paying for your student loans.
By paying off your loans with the highest interest rates first, you will save more over time.
Additional Tips for Repayment
There are plenty of ways you can repay your student debt. Here are some additional suggestions for accelerating the process.
- Use any additional cash toward repayment. Did you recently receive cash for your birthday or maybe a bonus from work? Decide to put all of your extra cash toward your student loans. This will save you money on interest and accelerate your repayment.
- Look for ways to cut back on your expenses. Review your budget and look for areas where you can cut back. Try cutting your cable bill or skipping your gym membership. You may even have memberships that you don’t use any more that you can get rid of.
- Consider refinancing your student loans. If you have a high credit score, you may be able to refinance your student loans for a lower interest rate. Keep in mind, there are pros and cons for going this route. Do you research and determine if refinancing is right for you.
- Consider consolidating your student loans. Keeping track of a lot of different lenders and loan amounts can be challenging. If you consolidate your loans, the lender takes a weighted average of your interest rates and applies it to one loan. It won’t save you money but it will make repayment easier.
- Ask your employer for student loan repayment assistance. Some employers are offering student loan repayment assistance. Ask your employer if they would be willing to help you with repaying your student loans.
The bottom line
Student loans don’t have to overwhelm you. By being proactive, you can create a strong plan for paying off your debt. The more consistent and dedicated you are to the plan, the faster you will pay off your loans.