Managing Your Student Loans

A 2016 survey released by Citizens Bank reported some concerning statistics about student loan debt in the United States. Focusing on Millennials, the survey revealed that:

• Less than 50% of those surveyed had considered ways to lower their monthly payments
• 30% of the participants did not know how much interest they were paying on their loans
• The average student loan debt is around $41,000
• On average, participants are spending about 18% of their salary on student loan payments
• 36% of Millennial surveyed say they would not have gone to college if they understood how much it was going to cost them

Student loans make it possible for many people to complete their undergraduate and graduate degrees, but the lack of knowledge about actual debt load is highly concerning. In order to maintain control over your debt – and ensure it does not balloon out of control – it’s essential that you have all the details needed to set up a realistic payment schedule. In today’s post, we’re going to provide an easy system for doing so.

#1. Take Inventory of Your Loans

Make a list of the loans you took out to help pay for your education. In most cases, you’ll have a federal loan and/or a private loan. Once you have the list of your loans, call your loan officer(s) and make sure you have accurate info about the following:

• Is the loan subsidized or unsubsidized?
• When is your first loan payment due?
• What are your repayment options?
• What penalties will you incur if you do not meet terms of your repayment agreement?
• Are your interest rates variable or fixed?
• Is deferment or temporary postponement possible? Are there any grace periods?
• Are there any benefits associated with your loan? For example, are you eligible for lower interest rates if you perform certain actions, such as setting up automatic payments?

Once you have all of this info, it’s helpful to compile it in a spreadsheet and mark you first repayment date on a calendar. From here, you’ll be able to get a more accurate view of the figures you’re working with.

#2. Create a strategy for paying off your loans

Once you understand all the factors at play, you can create a strategy to pay off your loans as quickly and efficiently as possible. Because interest is accruing on your loans, the amount you need to repay will be increasing each day. This means that the faster you pay off your loans, the less money you’ll repay in the long run. Establish a monthly budget for yourself and factor your loan payments into the budget in the same way you would factor in rent or food costs. If you can afford to pay more than the minimum, then do so. We recommend paying as much as possible without putting yourself into financial jeopardy.

Some Tips to Keep Things Manageable

In our experience working with students over the years and paying off our own school loans, we have accumulated some helpful tips to help you management your loan debt. In general it’s a good idea to:

• Pay off higher interest loans as quickly as possible. Of course, you need to meet the terms of each loan agreement, but if you have extra money to commit to loan repayments, designate it towards the loan with higher interest rates.
• Determine if it is possible/if you are eligible to consolidate your loans at a lower fixed interest rate that will lower your overall monthly payment and total lifetime accrual amounts.
• Pay down your loan amount whenever you can. If you have an unexpected windfall (work bonus, gift from grandparents, etc.), it’s a smart idea to use this towards paying down your principal, as this will reduce the amount of interest you’ll pay in the long run.
• Defer your loans until you are employed. If you have a federal government loans, you may be eligible for a period of interest-free employment before you get your first job. For private loans, you may be able to apply for forbearance for periods of unemployment.

Your loan amount may feel insurmountable, but if you make a plan and stick to it, you will be able to pay your loan off. The day you make your final repayment will be one to celebrate!