Student Debt Tips: 5 Steps to Tackling Student Loan Debt

Student debt: the one common denominator among those who are struggling with debt, especially in today’s world. Everyone wants to know how to pay off their student loans, and with loans being the most common way to afford a collegiate education, almost everyone has them.

You probably remember that fateful day, just six months post-graduate, you’re feeling great about life and thankful that you made it out of that institution alive, when BAM, in comes a letter that you weren’t quite expecting. You owe just how much? At that very moment, you’re imagining living a life with that constant student loan shadow hovering in the corner.

Student loan payments are rarely cheap and often hold you back from achieving other financial goals you have set for yourself, especially with the amount of your income it’s consuming. This is why it’s important to get on top of the loans from the very beginning and figure out the best course of action when moving forward in your life, your career, and your newfound student debt status. Here are five easy steps to follow that can make that transition from loan-free to when will I ever be free of this loan.

Apply for Income-based Payment

Although many are told of this genius plan when first calling the loan office to discuss how you cannot afford to make a $500 payment every month only six months out of college, there are still some who aren’t aware of income-based repayment, or even understand what that means. If you’re having trouble making payments, this is definitely something to look into.

Basically, here’s how it works. You’ll be asked a series of questions regarding your income and your monthly finances then a program will then figure up how much your monthly payment should be, based on those figures. Each year, you have to reapply, so if your yearly salary raises or decreases, it will be factored into your tailored plan. But the even better thing about this program is that, after 30 years of making on-time payments, the remainder of your loan will be forgiven.

This program is only available to federal student loans, but it is still worth looking into. It can make your life less stressful, and you’ll still be hacking away at that student debt in the process.

Consolidate to a Federal Direct Loan

You never realize just how many different places you’re collecting debt from to pay for your education until you receive your first loan breakdown. Typically, you’ll be looking at least three different banks that you’ve borrowed from and sometimes even more.

Regardless of how many loans you’ve taken out over the years to make it through college, the first thing you should do is consolidate all of your federal student loans into one direct federal loan.

Not only will this make it easier to pay everything on time, but also by consolidating your loans, you’ll qualify for student loan forgiveness programs. By crunching the numbers and having as many of your loans as you can in one place, it’ll be easy to keep track of, and you’ll be able to make one easy monthly payment, hassle-free.

Take Advantage of Loan Forgiveness Programs

The phrase “loan forgiveness” has been a favorite of many throughout the years. You ask yourself what exactly can you do to qualify for such a too good to be true program? Whatever it is, you’ll do it and jump at the chance to get some of that debt knocked out of the way.

Though loan forgiveness seems to be the pinnacle of student debt, there are strict rules for who can qualify for it and often this boils down to the industry you’re in and the profession you’re pursuing. For example, if you work as a teacher and agree to work within a particular type of school system, more often than not you’ll qualify for the student loan forgiveness program after teaching at the school for five years. Some government jobs and jobs in the medical field offer similar incentive programs. You will have to look around and see.

Check to see if the job you currently work at has a similar program, or something to aid in student debt repayment, and sign up now. Your student loan freedom could be just around the corner.

Make extra payments

This is a very common tip when looking at any kind of debt. If you want to get out of debt fast and make payoffs be more than just scraping the surface, check out making additional payments throughout a pay period. Many student loans default on 10-year loans, some even longer, that are split up into 120 payments that include that pesky interest.

If you’re committed to the process of paying off your student loans and fast, you’ll want to first establish a goal that you want to pursue and then figure out what your monthly payments need to look like to make that happen.

So, if you want to pay your student loans off within five years rather than 10, just double up on payments every month. Do whatever it is you need to do to accomplish those goals. And, to make things even easier, set up those extra payments as an automatic draft from your bank account. In doing so, you eliminate any problems that may arise with you forgetting that you meant to pay this loan, and it’ll set you up for a shorter loan payment period in the long run.

Get Ahead of Loan Interest

The loan is bad enough all on its own, but then you have to pay the interest rate on it as well. And those student loan interest rates aren’t cheap, especially for the higher dollar loans and for the more expensive institutions that you’re getting the loan for. So nine times out of ten, you’re going to end up paying double or even triple of what you borrowed initially, all because of an interest rate that just won’t quit.

While there aren’t many ways to get that interest down to a more reasonable rate, there are ways to work around it so you can pay off your principal debt faster, and bypass a huge chunk of that interest in the process. The best way to address student loan interest, and find the best method to get from under student loan debt, is to enforce the “debt avalanche” theory in your payback plans.

Essentially, you line your student loans up from highest interest rate to the lowest. Starting with the highest interest rate, you start making monthly payments in advance for future. This will create a snowball effect as one loan after the other gets eliminated. You’ll have time to pay more than what the interest can keep up with as you continue to work to pay off each loan.

This isn’t going to be the solution for everyone, or even every loan, but for those that it does work, it’ll send you well on your way to be free of that student debt once and for all.