Having student debt can be overwhelming. The burden of student loans is making it more difficult for graduates to buy a home. Even though politicians are still deliberating about the issue, you can’t wait for them to solve everything.
You need to develop a plan to manage your student debt while at college because it’s critical to your financial health in the future. The total number of student loans in the U.S. is more than $1.5 trillion.
With the right plan, you can manage your college debt at the university. Here are eight ways to manage your student debt.
Calculate Your Total Debt
Like any debt, the first step is to understand how much you owe in total. Usually, most students have multiple loans, both federal and private student loans. So you need to take time and lay down all the student loans you have.
That way, you can come up with a plan to pay off your debt: consolidate them or explore various student loan forgiveness programs.
Know The Student Loan Terms
Aside from totaling all your student debt, you should also know the terms of each loan debt. And that’s because each loan could have different interest rates and repayment terms. This information will help you develop a repayment plan to avoid extra interest rates, penalties, and fees.
You can also check the U.S. Department of Education’s website to find the best repayment plans.
Check The Grace Period
As you examine your student loans, you’ll realize each loan comes with its grace period. This is the amount of time you have after graduation before you begin your loan repayment. But the grace period can differ.
For example, Perkins loans give you a nine-month grace period, while Stafford loans give you a six-month grace period.
Consider Student Loan Consolidation
After getting the details, you can consider if consolidating all your student loans is the right move. The most significant advantage of consolidation is that it decreases the burden of your monthly payments.
However, it usually lengthens your repayment period. So even though you get more time to pay your debts, you’ll also pay more interest. Plus, the consolidated interest rate may be higher than some of your current loans.
So before you proceed, make sure you compare the loan terms. Also, when you consolidate, you lose your deferment options and income-based repayment plans that come with federal student loans.
Take The Debt Avalanche Road
It’s ideal to pay off the student loans with the highest interest rates first. One good strategy is to budget a specific amount above the required monthly payments. Then direct the excess tote debt with the biggest interest rate.
When you pay that off, you apply that total monthly amount to the second-highest interest rate, and so on. This strategy is called a debt avalanche and can help you pay off your debt.
Explore Student Loan Forgiveness
If you can afford the monthly payments, you can apply for debt forgiveness like Public Service Loan Forgiveness or discharge your student loans. You could qualify for loan discharge if your or the school shut down before you completed your degree.
Pay Down Principal
Another way to pay off your debt is to pay additional principal anytime you can. The quicker you decrease the principal, the less interest you’ll pay over the loan life. The interest is calculated based on the principal every month. So less principal means lower interest payment.
Pay Your Loans Automatically
Some loan lenders offer a discount on the interest rate if you accept that your payments be dedicated automatically from your account each month. For example, you can get 0.25%, and even though it looks small, it can significantly add up. Private lenders can offer discounts as well.
Keep in mind that not all the tips outlined in this guide can help you. But whatever the case, it’s a bad idea to do nothing when you’re having challenges paying your student loans. Your debt problem won’t run away unless you do something about it.
So we recommend that you talk to a student loan expert about your situation. They will help you make an informed decision and take the right action. If you have private student loans, your options are limited compared to federal student loans. But you can still get out of debt with a good strategy.