7 Steps to Get Rid of Student Loan Debt
It’s that time of year again: caps have been tossed, goodbyes have been said, and degrees are in hand. That’s right: newly-minted college graduates are pounding the pavement, looking for their first jobs, first apartments, and getting ready to make the first payments on their student loans.
While jobs and apartments tend to be met with excitement, the prospect of repaying student loans usually dredges up feelings of fear and anxiety. With average student debt loads exceeding $25,000, it’s understandable that many new grads feel overwhelmed at the prospect of beginning to pay them off.
But achieving a student loan-free life is possible; take a look at the steps below to figure out how to get on the path to freedom from your college debt.
Step 1: Total Your Student Loan Debt – That’s Right, All of It
The first step to tackling your debt is to figure out exactly how much of it you have. Set aside a lunch hour to contact all your lenders (or log into their websites) and create a running list of how much you owe each one.
When you’re finished, tally up your total debt. The final figure might be scary, but it’s important to know exactly how much you owe and who you owe it to. This will help you stay focused and organized on your path to student debt freedom.
Step 2: Figure Out What Your Monthly Student Loan Obligation Will Be
A month or so after you graduate, letters from your lenders will start showing up in the mail, detailing how much you’ll owe each one every month. It’s important to keep all of these letters to that you’ll be able to figure out exactly how much your monthly student loan obligation will be.
This is a critical piece of accomplishing step 6 ( see below), but it’s also important for negotiating the salary of your first job; you’ll need to be sure your monthly pay will all allow you to comfortably repay the debt you accrued during college. So whatever you do, don’t throw these letters away!
Step 3: Fight the Urge to Stick Your Head in the Sand
After completing step 1 and step 2, you might be feeling a little nauseated at how much debt you have and how much you’ll have to fork over to your lenders every month; for a lot of people, it’s very tempting to just start ignoring their student loans, especially if you don’t have a job yet. Don’t fall into this trap!
The very worst thing you can do is fail to deal with your debt. It may seem counter-intuitive, but if you find yourself in a situation where you can’t pay you student loan bill, contact your lender right away.
The repayment terms of student loans tend to be flexible; you may be able to put your student loans into deferment or forbearance, or opt for a plan that allows you to pay your student loans according to your income.
The most important thing is to be honest with your lender and show that you’re willing to pay what you can.
Step 4: Consider Consolidation
If you have several government-issued loans, it may be worthwhile for you to consolidate your loans into one monthly payment. The benefits of taking this step are two-fold: you’ll pay less in interest on your debt and you won’t have to deal with the organizational hassle of making several payments every month.
But be careful: only consolidate if you’ll end up with an interest rate that’s less than the current rates on your loans. Otherwise, consolidation doesn’t make financial sense.
Step 5: Look Into Loan Cancellation and Forgiveness Programs
Workers in certain fields may be able to take advantage of federal loan forgiveness and cancellation programs.
For example, under the Public Service Loan Forgiveness Program, borrowers who work for non-profit organizations are eligible to have the remaining balance their federal student loans cancelled after 10 years of on-time payments.
Teachers are also eligible for up to $17,500 in federal loan forgiveness if they work for at least 5 consecutive years in a low-income school.
Be sure to research all programs out there that you may qualify for – there’s no reason to pay more on your loans than you absolutely have to!
Step 6: Make a Budget
Now that you have a better sense of how much you owe and are aware of some of the options out there to ease the burden, it’s time to get down to the nitty gritty of repaying your student loan debt.
Making a monthly budget that prioritizes student loan repayment is a critical step in getting to your debt-free date faster. Play around with the numbers to see how much extra you can squeeze out of your monthly income to put towards your student loans.
For example, with all the T.V. that’s available on the Internet these days, do you really need to be paying for cable? After all, that’s an extra $100 per month ($1200 per year!) you could be putting towards your student debt.
Step 7: Brainstorm Ways to Make Some Extra Cash
If you’ve gotten creative with your budget and you’re still coming up short on extra funds to repay your student loans, it’s time to start thinking about ways to bring in extra cash. Getting a part-time job is one idea, but you could also pick up some overtime at your regular job or find a tutoring gig.
There are also online options, like freelance writing for a popular website or blog or selling your handmade goods on Etsy. The point is, taking on extra work is a great way to put together some funds to make extra payments on your student loans. Find something that appeals to you and run with it.
Conquering your student loans seems scary at first, but with these steps you’ll be on your way to debt free in no time.
This a guest article from Angie Picardo, a staff writer for NerdWallet.