Student loan debt has grown steadily over the last several years, with the total amount of outstanding debt topping $1.3 trillion according to a report from the Federal Reserve Bank of New York. Many borrowers owe more than $50,000 and some even owe more than $100,000. Dealing with student loan debt can feel overwhelming, but it's possible.
Explore your repayment options. Many student loan providers give you several different options for repaying your student loans. Some repayment plans are based on what you earn. Others can lower your payment in the first few years of repayment and gradually increase the payment amount as you earn more.
Choose your repayment period carefully. Some loans let you lower your monthly payment by extending your repayment period, sometimes up to 25 years. While this gives some breathing room in your monthly budget, it also means that you’ll be in debt for longer and you’ll pay a lot more interest. Choosing a shorter repayment period means you’ll pay off your loans quicker, but be sure you can afford the monthly payments before you commit.
Talk to your lender if you’re having trouble. If you’re struggling to make your payments, don’t just ignore your loans. Student loan debt is extremely difficult, next to impossible even, to discharge in bankruptcy. Paying your loans is typically the only relief. If you’re having trouble with payments, contact your lender to find out what options are available to you. You may be able to temporarily suspend or reduce your payments for a few months until you can afford to pay.
Make the interest payments if you go into deferment or forbearance. If you’re on a hardship plan, you may not have any payments due. However, interest will still accrue on your loan and the unpaid interest will be added back to the balance of your loan once your hardship program ends. To keep your loan balance from growing and your monthly payment from increasing, try to make at least the interest payments during your hardship plan.
Limit your other borrowing. While you’ll want to take out a loan to buy a house or car, or credit cards for building your credit or leisure spending, these debts can work against you when you have student loans. Taking on additional debt makes it harder to make your student loan payments. Avoid taking on other debt as much as you can until you’ve paid off your student loans.
Consider consolidating your loans. If you have several loans, especially with different interest rates, you may be able to consolidate them all for one loan with one monthly payment. Student loan consolidation is best when the new interest rate is low than the average interest rate you were previously paying and your new monthly payment is lower than your previous monthly payments combined. Consolidation is ideal when you have either all federal student loans or all private student loans.
Pay extra whenever you can. As you have extra money – a tax refund, year-end job bonus, higher than normal commission – consider putting at least some of it towards your student loans. Make sure you indicate that you want the extra payment to reduce your balance. Otherwise, the lender will use the payment to advance your next due date. You can get rid of the mountain of student loan debt with time, effort, and patience.