Financial aid for higher education is a trillion-dollar industry. How crazy is that?! That means trillions of dollars are loaned to young people, and is expected to be paid back. Actually, things are getting out of hand. While every situation is different, the steps to take to pay off student loans are relatively the same. I’m sharing 8 tips to help you pay off your student loans.
Student Loan Facts and Stats
Before I dive into what you can do to aggressively pay off student loans, I want to shed light on some financial aid facts and statistics. According to Forbes, “Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans.”
More surprisingly, over 44 million borrowers owe over $1 trillion! That is more money than Oprah may see in a life time! The Forbes article also shared that of those 44 million financial aid borrowers, just over 11% of them are delinquent on paying back their loans. The reality is that the total cost of education can take decades to pay back, depending on how much a person earns right out of college.
A majority of the clients I work with have student loan debt. Some of them feel like they will die with their debt, and that doesn’t have to be the case! There are certain things anyone can do to help pay off student loans and release the chains of debt.
Tips to Help You Pay Off Student Loans
#1 – Understand exactly what you owe
Before you can attempt any type of repayment plan for your student loans, you need to understand exactly what you owe. Do you have private loans, federal loans or both? Do you know all of your loan servicers, and if they are different from the lenders? What is your total balance due and what is your interest rate?
I suggest you purchase a notebook dedicated to your student loan information. This notebook will be your life line for paying and managing your student loans. Your notebook should list any and all pertinent student loan information, including but not limited to: total balance due, minimum payment, due date, interest rate, lender and servicer names, type of loan (federal or private), date in which loan should be paid off and potential repayment options.
#2 – Assess your current status (any delinquencies, repayment plan options, forbearance)
Once you have an idea of your entire student loan situation, it’s time to do a deeper dive into the current status of all your loans. Are any of your loans in default, meaning they are past due? Are any of your loans in a forbearance status? Are you on an income driven repayment plan? Make sure you understand the status of each loan. Leverage your notebook to keep track.
#3 – Refinance, consolidate, or set up repayment plans
If you have delinquencies, you will want to assess if you can bring the past due balance current. If not, you should call your lender and try to set up a repayment plan. Delinquencies can hurt your credit score and make it hard for you to get future assistance with your student loan payments.
If you don’t have delinquencies, great! Can you afford your current student loan payments? Can you afford to contribute more money on top of your current payment? If you are in a situation where you can handle your student loan payment and contribute more, you won’t need to work with your lender. You can create your own repayment plan, which we’ll discuss in the next section.
If you don’t have delinquencies, but you can’t afford your current payment, reach out to your lender. While federal loans are more likely to be lenient with repayment plans, some private lenders offer assistance as well.
You won’t know your options until you ask. Often times, any lender will request you submit an application or current financial status recap to see if you qualify for any repayment plan options. You will want a good understanding of your budget before you agree to anything.
Lastly, refinancing and consolidating are options. If you have a good credit history and good standing with your loans, you may be able to consolidate or refinance your student loans to lower the payment, lower in the interest rate, or deal with one big loan instead of a many smaller loans. Do your research before committing to anything. You’ll want to make sure this is the best plan of attack for your situation.
#4 – Create your own repayment plan (update budget, snowball method, set up automatic bill pay)
Assuming that you aren’t delinquent on your student loans, or maybe you are but you’re in a position to get current quick, and you can contribute more than the current payment, create your own repayment plan.
This is a great option for anyone who can afford to do it and can stay consistent to implement. It’s a great option because you create the terms of your repayment. You aren’t locked into anything and you can dictate contributing more, if you choose to.
It all starts with a detailed budget plan. Your budget will show you how much extra money you have, after all your bills, expenses and savings, to put towards your student loan payment. This information will be powerful for creating your repayment plan.
I would recommend using a strategy like the snowball method to attack your student loans – put any extra money to the loan with the lowest balance, while paying the minimum on the other loans. Once that loan is paid off, move on to the next and the next, until they are all paid off.
You can help yourself stay consistent by setting up automatic bill pay for your loans, following your repayment plan. Some lenders even give a discount or interest rate reduction for people who have their payments set up on automatic bill pay.
#5 – Find ways to cut back (living situation, hold off on big purchases)
While you may or may not have extra money to contribute to your student loan payments, you can always find ways to cut back. Maybe you move back home, get a roommate, find a part-time job, let go of discretionary expenses, or hold off on traveling.
When you have any form of debt, including student loans, you’ll have to find ways to live on less, so you can pay your debts off faster. Hold off on big purchases like a house or car, until your student loans are in a manageable place. This is probably the hardest thing for most young people do to. Think about it, they are out of school and making good money…why wouldn’t they want to spend it?!
It will take a lot of sacrifice, discipline and accountability, but living under your means will help you pay off student loans, and any other debt, while ensuring all of your responsibilities are still being taken care of.
#6 – Explore loan forgiveness programs
I had touched on the subject of repayment plans, but some lenders offer student loan forgiveness. This is more common in federal loans, but private lenders may have some options. For example, if you work in the health or government sectors and pay on your student loans for a specific amount of time (say, 20 years), the balance after 20 years will be forgiven.
This doesn’t apply to every industry, nor are any lenders required to offer this type of program, but like I said before, you don’t know until you ask. If you have an opportunity to have your balance forgiven after a certain amount of consistent payments, why wouldn’t you take advantage?
#7 – Employer assistance options are increasing
What is becoming increasingly popular is employers assisting their employees with student loan assistance options. An article from Go Banking Rates shared 20 companies that offer student loan payment assistance.
Companies do anything from matching a portion of your payment to providing lump sums. If you are looking for a new job, inquiring about the company’s student loan payment assistance options would be wise!
#8 – Work with a coach
Remember how earlier in the article I said that the hardest thing for most young people to do is live under their means? Well, it doesn’t just apply to young people. If you have never been able to master budgeting or you can’t control yourself, outside accountability can do wonders.
I’m a financial coach and I work closely with clients to create and stick to a budget, pay down their debt, stay consistent with their budgeting, saving and debt-repayment efforts, and focus on the bigger picture. It can be hard to go through financial troubles alone. A coach can be a partner as you work to get ahead financially.
If you have student loan debt and don’t feel like you have a way out, schedule a free consultation with me and let’s talk it out!
Related: How to Control Student Loan Anxiety
If the statistics above didn’t show you that you aren’t alone in your student loan pay off journey, I’m not sure what else will! Millions of people are on the quest to pay off student loans.
Follow the tips above to get yourself on a plan and on the right track to get rid of your student loan debt as quickly as you can. It will not be an easy, nor overnight journey, but it can happen! Do you have student loans? What are you currently doing to pay off your student loans? Leave a comment below to share!