Student loan debt is a huge issue in the United States. According to Forbes, Americans owe a staggering $1.5 trillion in student loan debt. That’s more than credit card and auto loan debt combined!
Many college graduated students are in a vicious cycle – they have to pay rent, buy groceries, and other living expenses, which forces them to put off paying back their student loans.
As a result, many students are taken advantage of by predatory lenders or struggling with debt for years after graduating college.
If you take an example of a $200,000 student loan debt with 4.5% interest, then the monthly payment of that loan will be $1,300 per month for 25 years (including both principal and interest). That’s nearly $40,000 worth of student loan bills every single year!
With an average salary of around $52,000 per year, there is no way someone has over $40,000 to spare every year. So, what can you do if you’re struggling to make your student loan payments?
Here are 10 steps that could help you break free from your student loan debt:
- Calculate exactly how much you owe and find a loan calculator to see how long it will take to pay off your debt.
- Make a budget and figure out how much you can afford to pay each month for your student loan debt.
- Contact your lender and discuss your options – they may be able to reduce your interest rate, change your monthly payment or even extend the terms of your loan.
- Pay more than the minimum amount due every month – this will help you pay off your loan faster.
- Sell unwanted items online or in a garage sale to make some extra money.
- Get a part-time job or start freelancing to bring in more income.
- Switch to a lower interest rate credit card and put your student loan payments on autopay.
- Adjust your withholding to take home less money every week, but pay more towards your student loans each month.
- Get help from a debt consolidation company that can negotiate with lenders and create a customized repayment plan for you.
- Use the free resources available to lower your monthly expenses, like online shopping portals or air travel search engines.
By following these simple steps, you can get started on the road to full-fledged financial freedom!
Concrete Steps to Pay Student Loan Debt in 10 Steps
Here are some concrete steps you can take to start paying student loan debt and break free of the cycle:
#1. Calculate exactly how much you owe and find a loan calculator to see how long it will take to pay off your debt.
By knowing the amount of money owed, you can prioritize your loans so that you can pay off the ones with the highest interest rate before others.
Start by creating an excel spreadsheet listing all of your student loans as well as their interest rates, balances and minimum monthly payments.
#2. Make a budget and figure out how much you can afford to pay each month for your student loan debt.
Devote at least 20% of your income to paying off your loans each month- even if it’s just the minimum payment.
Try to break this down into a weekly or daily budget so you’re not overwhelmed by the total amount.
#3. Contact your lender and discuss your options – they may be able to reduce your interest rate, change your monthly payment or even extend the terms of your loan.
Sometimes, just communicating with the lender can help you find a repayment plan that works for you.
#4. Pay more than the minimum amount due every month – this will help you pay off your loan faster.
Even an extra $50 each month can shave years off of your loan repayment schedule.
#5. Sell unwanted items online or in a garage sale to make some extra money.
If there’s anything you can part with, it’ll be worth the effort to get some extra cash to throw at your loans.
#6. Get a part-time job or start freelancing to bring in more income.
If you can’t afford to make extra payments towards your loans, try to at least maintain the same level of payment each month. It will help you stay on track and avoid any penalties from your lender.
#7. Switch to a lower interest rate credit card and put your student loan payments on autopay.
You can transfer balances from cards with high-interest rates to one with a low balance transfer fee, helping you save money on interest fees. However, be sure to stop spending on this new card, or else you will just be transferring your debt elsewhere!
#8. Adjust your withholding to take home less money every week, but pay more towards your student loans each month.
By taking home a little bit less each month, you can make a bigger payment on your student loans and avoid any extra fees or interest you would have otherwise incurred by paying the minimum monthly payment.
#9. Get help from a debt consolidation company that can negotiate with lenders and create a customized repayment plan for you.
A debt consolidation company can work with your lender to get a lower interest rate, change your monthly payment or even extend the terms of your loan.
#10. Use the free resources available to lower your monthly expenses, like online shopping portals or air travel search engines.
By taking advantage of these free services, you can make more money available for paying down your debt and avoid excessive fees from going out to eat or traveling.
Refinancing a Student Loan Debt
If you have a cosigner, they will have to agree to your refinancing terms as well. Before you start a new loan process, be sure that the new rate is going to reduce your monthly payment amount significantly enough so that it won’t leave you stressed out and broke.
If it doesn’t lower your repayment amount very much or at all, it may not be worth going through the application process.
Also, don’t change too many loans at once since doing so will make it harder for you to keep track of your debt and its repayment terms.
How to Refinance a Student Loan Debt
If your student loan interest rate is too high and you don’t think it’s worth paying off at your current repayment rate, you can start the process of refinancing by finding a compatible lender.
Cosigner release is an option you should be looking for as well since having a cosigner is almost like putting all of your eggs in one basket.
With cosigner release, you can retain control of your student loans without having to worry about any late or missed payments since the lender won’t hold your cosigner responsible if you’re not able to make a payment.
These are some steps that will help you refinance your loan and break free from paying off an expensive student loan debt. However, refinancing isn’t the right solution for everyone and it’s important to weigh all of your options before deciding if this is the best choice for you.
Student Loan Debt – FAQ
What is student loan consolidation?
Student loan consolidation is the process of combining all of your federal student loans into one new loan.
This can be helpful if you’re struggling to keep track of multiple payments each month or have trouble remembering due dates.
By consolidating your loans, you’ll only have one payment to worry about each month and you may be able to get a lower interest rate.
What is student loan refinancing?
Student loan refinancing is the process of taking out a new loan to pay off your current student loans.
It can be helpful if you have a high-interest rate on your current loans or if you need to extend the terms of your repayment plan.
By refinancing your student loans, you can get a new interest rate and change your repayment plan so that it’s better suited to your current financial situation.
How do I apply for student loan consolidation?
To consolidate your federal student loans, you’ll have to fill out the Free Application for Federal Student Aid.
This form is used by the Department of Education to determine your eligibility for federal student aid, including loans and grants.
How do I apply for student loan refinancing?
To refinance your student loans, you’ll have to find a lender that offers this service. You can start by doing a search on the internet or by asking friends and family for recommendations.
Be sure to compare interest rates and repayment terms before you choose a lender.
What is the interest rate on student loans?
The interest rate on student loans varies depending on the type of loan you have and the lender you borrow from.
Federal student loans have a fixed interest rate, which means it will not change over the life of the loan. Private student loans may have a fixed or variable interest rate, which means the rate will change over time.
What are deferment and forbearance?
Deferment allows you to postpone your student loan payments for a set period of time.
Forbearance allows you to reduce or pause your student loan payments temporarily, but interest will continue to accumulate on your loans. Before applying for deferment or forbearance, make sure to understand the terms and conditions.
What are income-based repayment plans?
An income-based repayment plan bases your student loan payments on your income instead of making you pay a fixed amount each month.
You can apply for an income-based repayment plan if your federal student loans are in default or if your income isn’t high enough to make your current payments.
How do I apply for an income-based repayment plan?
To apply for an income-based repayment plan, you’ll have to fill out the Income-Based Repayment Plan Request form.
You can submit this form at any time; however, it’s recommended that you file it when you first begin to have trouble making your monthly payments.
Is there any way to get my student loans forgiven?
There are a few ways to get your student loans forgiven, including working in public service or teaching in a low-income school district.
You can also qualify for loan forgiveness if you have a medical condition that prevents you from working. In certain cases, you may be able to get your federal student loans forgiven after 10 years of on-time payments through an income-driven repayment plan.
The Bottom Line
If you’re feeling overwhelmed by your student loan debt, there are ways to get help. By following these 10 steps, you can start on the path to breaking free and becoming debt-free.
And, if you’re still not sure where to start, consider talking to a financial advisor or using one of the many free resources out there to help get your budget in order.
With a little bit of effort, you can finally be rid of that student loan debt once and for all.
