Whether you’re still in college or have already graduated, it’s never too soon to tackle your student debt. And no matter the size of your loan balance, it helps to have a plan. We’ll walk you through eight easy-to-follow strategies for managing your student loans. Struggling to stay on top of your payments? We have […]
The post How to Manage Your Student Loan Debt appeared first on LendEDU.
Whether you’re still in college or have already graduated, it’s never too soon to tackle your student debt. And no matter the size of your loan balance, it helps to have a plan.
We’ll walk you through eight easy-to-follow strategies for managing your student loans. Struggling to stay on top of your payments? We have solutions for that too. Keep reading for student loan payoff tips and tricks you can put to use today.
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As you read through these strategies, remember there’s no one-size-fits-all student loan repayment plan. Adopt what works for you. Tweak what doesn’t. The goal is to draft a blueprint you can follow consistently.
Ready to get started? Here are eight proven strategies for managing student loans:
| Strategy | Helps with |
| Understand your grace periods | Preparing for repayment |
| Explore debt payoff methods | Prioritizing your payments |
| Enroll in autopay | Automating repayment |
| Open a dedicated bank account | Avoiding autopay overdrafts |
| Pay more than the minimum | Accelerating debt payoff |
| Split up your payments | Making payment amounts more realistic |
| Consider consolidation | Streamlining repayment |
| Refinance your student loans | Lowering your APR |
Our expert’s take: How to prioritize student loan payments along with other financial goals
I always suggest making a list or spreadsheet of outstanding debts, their associated interest rates, balances, and terms. Identify the highest-interest-rate loan and make a plan to make extra payments to that loan first (the snowball method of paying off loans). Keeping this strategy in mind, ensure you have funds available for saving, paying bills, and spending. I like an easy method called the 50-30-20 rule: you spend 50% of after-tax income paying liabilities and utilities (including groceries and fuel, essentially needs), 30% on enjoying life (discretionary), and 20% toward savings.
You’ll enter a grace period when you leave school or drop below half-time enrollment. No payments are due during this time, but your loans still accrue interest. For most borrowers, the grace period lasts six months.
So you have six months to pad your savings or make preemptive payments toward your loan balance. Either way, you’ll be better prepared for repayment when your grace period ends.
You can use popular debt payoff strategies, such as the snowball and avalanche methods, to decide which loans to pay off first. If you opt for the snowball method, you’ll first pay off loans with the smallest balances. Under the avalanche method, you’ll prioritize loans with higher interest rates.
You don’t have to pick one or the other. Group your loans by interest rate, and focus on the group with the highest rates. Work through the loans in that rate group from smallest to largest and then move on to the next rate group.
Leveraging autopay in your debt repayment strategy has multiple benefits. You won’t need to worry about late fees or missed payments, and you won’t have to remember yet another due date.
Plus, many lenders offer rate discounts when you sign up for autopay. Reduced rates mean paying less over time—which means getting out of debt faster.
Some borrowers are autopay-averse because they’re worried they’ll overdraft. That’s a valid concern, but you can work around it. Rather than using your primary checking account for student loan payments, open a new one.
Then adjust your direct deposit so a portion of each check—enough to cover your payment—goes into your student loan account. Not only will you mitigate any overdraft fears, but you’ll automate the entire loan repayment process.
If you can swing it, pay a little extra each month. Perhaps you’ll pay an additional $50 or increase your payments by 5%. Any supplemental amount makes a difference, so start small if you need to.
Direct your lender to apply overpayments to your principal balance for maximum efficacy. The lower your principal, the less interest will accrue. We recommend combining this strategy with the next tip to scale your efforts.
This may come as a shock, but you don’t need to make your monthly payment as a single payment each month. As long as you satisfy your total monthly obligation by the due date, you can split your installments into weekly or biweekly payments.
Paying more often—even if you’re paying the same amount every month—is another way to cut back on accrued interest. It can also be easier on your wallet, particularly if you align your loan payments with your pay dates.
Consolidation simplifies repayment by merging multiple federal loans into one payment. In addition to combining your payments, consolidation could lower your interest rate. You must apply for consolidation, but eligibility isn’t based on credit.
Keep in mind that consolidation restarts your loan term. Consolidation could mean riding out your student debt longer than you planned unless you pay off your loans early. For that reason, consolidation (and the tip below) may not make sense if you can’t get a better rate.
Refinancing is similar to consolidation, except it refers to private loans. To refinance student loans, you’ll apply with a private lender. If approved, the lender will pay off your old loans, and you’ll start making one monthly payment to your new lender.
You can refinance federal and private loans together, but we recommend keeping your federal loans separate in many cases. Otherwise, you’ll lose eligibility for federal repayment plans and loan forgiveness.
It can be hard to predict the impact of student debt until you’re in repayment. Maybe your income is lower than you hoped. Perhaps your installments are higher than you anticipated. Whatever challenges you’re facing, you have options.
If you have private student loans, contact your lender to find out how it supports borrowers struggling with repayment. If you have federal student loans, the three main ways to get back on track: are income-driven repayment, deferment, or forbearance.
Income-driven repayment (IDR) plans are available to most federal student loan borrowers.
These plans cap your federal loan payments to a percentage of your discretionary income. (Your discretionary income is what’s left over after paying for essentials such as food and housing.) The best part? Enrolling in an IDR plan doesn’t compromise your loan forgiveness eligibility.
Four IDR plans are available, each with its own cap and repayment term. Here’s a quick look at the IDR plans you may qualify for:
| IDR plan | % of discretionary income | Term |
| Saving on a Valuable Education (SAVE) Plan | 10% | 20 – 25 years |
| Pay As You Earn (PAYE) Plan | 10% | 20 years |
| Income-Based Repayment (IBR) Plan | 10% – 15% | 20 – 25 years |
| Income-Contingent Repayment (ICR) Plan | 20% | 25 years |
You can apply for an IDR plan online with your loan servicer or the U.S. Department of Education. When you apply, you can select the IDR plan of your choice. You can also ask your loan servicer to choose whichever plan results in the lowest monthly payment.
If approved, you could owe as little as $0 per month. You must certify your finances each year. Your installment amount could change if your income increases or decreases.
Student loan deferment pauses your payments. You’re likely aware of in-school deferment, but it’s not the only type of deferment available. Once you’ve left school and exhausted your grace period, you may qualify for:
Each type has its own eligibility requirements and lasts for different lengths of time.
You can use cancer treatment deferment, for example, for the duration of your treatment and for six months after. Unemployment deferment postpones your payments for a maximum of three years.
Deferment is worth considering if you think you can make future payments but can’t make them right now. Just keep in mind that interest may still accrue while you’re in deferment, and your deferment period won’t count toward loan forgiveness progress.
Forbearance is much like deferment. Your payment obligation is suspended for a set time. Payments resume when you’re no longer eligible for forbearance or when your forbearance expires.
The most important differences between forbearance and deferment are:
There are several ways to qualify for forbearance, and financial hardship is one of them. If your loan payments total 20% or more of your gross monthly income, your loan servicer must grant a mandatory forbearance.
You can request a general forbearance even if your loan payments are less than 20% of your income. Your combined lifetime forbearance periods can’t exceed three years in each case. Request forbearance wisely—and only if you truly need it.
If you are struggling to make student loan payments and want to avoid default, look for a financial counselor who specializes in this area.
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