In a recent study by Student Loan Hero, 61% of respondents said they fear their student loan debt worries are spiraling out of control. We know having these loans causes stress, but thankfully there are ways to manage this debt to help prevent it from taking too much control over your life. For this post, we focus specifically on tips that help in managing student debt to pay off your loans faster, save money on interest costs, get you organized and maybe help you feel better about your situation.
If you have multiple student loans, either because you haven’t refinanced yet or you wanted to maintain some of your private or federal loans, create a simple spreadsheet that has the loan amount, the payment term, the monthly payment and the interest rate. It’s also important to know who your loan servicers are, if you have your loans serviced separately. This will give you a summary of your loans that will help you see the bigger picture as the loans get paid off. Little things like calendar reminders every month or a reminder on your phone will keep you organized and help you pay down those loans faster.
The snowball or avalanche strategy are two of the most popular debt pay down strategies. Both are simple and easy to apply to your student debt. Here is a quick summary of each:
Avalanche: Using your spreadsheet, sort your loans by interest rate (high to low) and put any extra cash towards the loan with the highest interest rate while making the minimum monthly payments on the other loans. You will save in interest by paying off the highest interest loan first with this method.
Snowball: Using your spreadsheet, sort by balance (low to high) and pay off the loan with the lowest balance, first. This is a good way to get rid of a loan completely and reduce the burden of having multiple loans to pay off.
Automatic payments are a quick and easy way to start your journey to paying off your student loans. Most lenders will let you set up automatic monthly payments with any bank account. Setting up automatic payments for your finances can help you stay on track and avoid missing a payment.
We frequently write about the benefits of refinancing, but an often-overlooked benefit is a practical one: you will have one monthly payment for all your loans. When it comes to managing student debt, one monthly payment is much easier to manage than several. Interest rate savings are a large reason as to why many people refinance with us, but consolidating your loans adds convenience, which can help you stay organized and on top of your finances.
Working toward a short-term goal will help you stay motivated. For example, try to pay more than the minimum monthly payment for 6 months in a row. Little victories make a big difference in how quickly you pay off your loans, and you will get the added mental boost of accomplishment while you work on the larger goal of getting out of debt completely.
Even though student loans feel different than other types of debt, similar strategies apply. Cut costs where you can, get on a plan and manage payments wisely. Using the above advice for your student loans can help relieve some of the burden they cause. Do you have any additional tips for managing student debt? Let us know on Twitter @PenFed.