Paying Off Your Student Loan in 2014: Tips for Success
If you’re like most college graduates, you entered 2014 with at least some student debt to pay off. But your student loans don’t have to be a huge burden in the coming year. Here are a few ways you can get your finances together this year, and make progress toward full repayment—or pay them off entirely—by the end of the year.
Get to know your loans
A lot of people pay for traditional and accredited online college with a combination of private and federal loans—and it’s not uncommon to be left with a complicated hodgepodge of different types of loans to sort through after graduation. If you haven’t already, now’s the time to sit down and figure out who you owe money to, how much, and how much interest you’re paying on each loan. Know which of your loans is the most expensive, which are variable and which are fixed rate, and whether or not they’re consolidated.
Make a plan for repayment
Once you have a handle on where you owe money and how much you owe, you can start figuring out how to pay it back as fast as possible. The faster you pay back your loan, the less expensive it will be in the long run. Crunch some numbers and figure out what your monthly payment would be if you were trying to pay off your loan within three or five years as well as the longer term your bank probably set for you.
Overpay whenever possible
If you pay the minimum amount every month, chances are you’ll be in debt for a long time—and that’s just how lenders like it. Instead of making them rich, pay off your debt sooner than they suggest—and save yourself some money. Target the loan with the highest interest rate first, pay it off as aggressively as you can—and then move to the loan with the next highest interest rate.
Look into repayment assistance if needed
Sometimes, however, you can’t afford to make more than the minimum payment. If you’re struggling to pay back your student loans, there are several government programs that may be able to help. The Income-Based Repayment program and the Pay-As-You-Earn program both allow you to reduce your monthly payments to a rate you can afford, as calculated by your monthly income. There are also deferment and forbearance options for those who are really cash-strapped.
Cut costs where you can
As part of your student loan repayment initiative this year, it’s a good idea to take a look at all of your finances. Examine your monthly expenses and identify where you’re overspending—and where you have an opportunity to save money you could be putting toward your student loan. Whether it’s an expensive latte habit you have to kick or a more dramatic life change you need to make, chances are there are at least a few places in your life where you could save money.
Paying off student loans isn’t easy. But it’s possible you could make your student loan burden lighter in the New Year by following these steps. Start by figuring out what you owe and to whom, if you don’t already know—once you have a clear picture of your debt, paying it off will become easier. Take steps to get help by looking into federal assistance programs for student loans if you need to; if you have the money, however, it’s always a better idea to try to pay off your loan aggressively. Finally, take a look at your larger financial picture to determine where you could be saving money—and you should be able to make a dent in your loans in the New Year.
Sources
Ed.gov: Deferment and Forbearance
Ed.gov: Repay Your Student Loans
More About Understanding Student Loans
- Credit Repair Services You Should Never Pay For
- Questions You Should Ask Before Applying for Student Loan Forbearance
- The Bank on Students Act: What It Is, and How It Could Help Student Borrowers
- How the Death of a Co-Signer Can Affect Your Student Loan
- Peer-to-Peer Student Loans: What They Are, and How They Can Help You Pay for College
- If You're Unable to Work Because of a Disability: What Happens to Your Student Loan?
- New Rules for Debt Collectors: How They Could Affect Your Student Loan
- Having Trouble Repaying Loans? The Department of Education May Be in Touch
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