By now I’m sure most people are well aware that student loan debt has become a big part .
44 million borrowers across $1.3 trillion in student loans outstanding.
An average 2016 graduate left college with more than $35k in student loans.
You get the point: student loans are here to stay. They’ve become something that millions have to deal with.
My wife and I graduated college with a combined $100k in student loan debt. It’s had a big impact on both of us and has greatly influenced how I view money. It ended up being the underlying drive behind starting Young Adult Money five years ago as well as publishing my first book, Hustle Away Debt.
There’s a lot of advice out there about how to avoid student loan debt, but my focus is on what to do if you already have student loan debt. You can’t go back in time, though, and millions are looking for advice on how to best deal with student loans because they already have them.
Today I will share 5 things you should do if you have student loans. Some of these will take longer than others, but all are good things to do if you want to feel in control of your student loans.
1) Understand your Student Loans
While most people have a general idea of how much they have in student loans, it can be helpful to lay it all out in a spreadsheet. It’s the only way to get a full detailed picture of your student loans.
You’ll want to record exactly how many student loans you have, how much each is, what the interest rate is on each, what the minimum monthly payment is, and when they will be gone if you continue to make the minimum monthly payment.
You can steal my free student loan tracking spreadsheet that lays out all these categories. You don’t have to constantly update this spreadsheet, but giving it an initial run-through and updating quarterly, bi-annually, or annually can be really helpful.
2) Review Repayment Options
Understanding your student loan repayment options is important, but sometimes I think it doesn’t get to the heart of the issue: ultimately you will need to pay off your student loans.
Note that private lenders will vary and have less freedom and options. Needless to say, prioritizing paying off private student loans is a good idea.
Keeping that in mind, you’re most likely on the standard repayment plan of 10 years if you have a Direct Loan.
One alternative to the standard repayment is the Graduated Repayment Plan. While it also has a standard repayment period of 10 years, it has lower monthly payments at the beginning, which increases every two years. This is can be a good option for graduates who need some time to build their income.
A similar repayment plan is the Extended Repayment Plan, which lengthens your repayment period to 25 years. You can choose to pay a fixed or graduated amount.
There is also income-based repayment plans, which caps your student loan payment based on a percentage of your income.
While it can be painful, I typically steer people towards at least making the payments over the course of ten years. Ultimately the longer you take to pay off your loans, the more expensive they will be.
3) Consider Refinancing your Student Loans
Okay you have your student loans laid out in a spreadsheet and understand the various repayment options available to you. The next step is to consider refinancing your student loans.
Student loan refinancing has exploded the past few years as the outstanding student loan debt in the United States has reached unprecedented levels. This has created a business opportunity for private lenders as they have the ability to take on student loans and reissue them with lower interest rates. A win-win for everyone involved.
The most popular student loan refinancing company is SoFi. The average savings on refinanced student loans on SoFi is $288 a month and $22,359 in total. You can get a free quote at their website and see what sort of savings you’d be looking at for your student loans. If you have private student loans with a high interest rate this can be a really great option, and may even be a good option for all of your student loans.
There are some risks that come with student loan refinancing. Federal student loans have protections built in, such as deferment, forbearance, and income-based repayment options, which you lose when you refinance your loans with a private lender like SoFi.
4) Look at How Student Loans Fit in your Budget
Student loans give people stress and anxiety, so it’s sometimes difficult to think rationally about them. Yes, student loans can be a huge drag on your finances and the overall balance is usually difficult to stomach, but thinking strategically about how they can impact your life can help keep things in perspective.
If you get your student loans down to a reasonable interest rate, it might not make sense to pay them off as quickly as possible. For example, if you have your student loans at a 6% or lower interest rate, it might make sense to make the minimum payment and focus on building up your retirement savings or other financial goals.
For others it will make sense to pay them off as quickly as possible, while others might want to take a more balanced approach of contributing a little extra here or there.
My point is this: you need to think about how your student loans fit into your overall finances and not let them crowd your judgement. Review your budget and see how you can make them fit (or start to budget if you haven’t already) – and think about what you are willing to sacrifice to pay them off faster.
5) Consider Options for Paying off your Student Loans Faster
My wife and I ultimately decided that we wanted to increase our income to the point where it would offset our monthly student loan payments, which totaled around $1,000 when we graduated. I was able to do this through side hustles.
Side hustles are any way to make extra money above and beyond your 9-5. Initially some of my side hustles included working on and improving spreadsheets for small businesses, blogging, and freelance writing. I’ve since moved into more entrepreneurial side hustles like
When it comes to side hustles the most important thing to do is pick the right side hustle for you. That may be an online or at-home side hustle (here’s 50+ ideas that fall into these categories) or it may be a “quick money” side hustle like serving at a restaurant on weekends.
Before starting a side hustle I recommend checking to see if there are any “easier” things you can do to increase cash flow, such as cutting cable or other expenses, lowering the interest rate on your debt. I summarize these in “the pre-hustle checklist” in my book Hustle Away Debt.
9 Unique Side Hustle Ideas
How to Start a Blog Side Hustle
Student loans are a challenge for many, but one way or another they have to be dealt with. Being proactive and doing the things on this list will help you feel more in control of your student loans. Ideally you will end up with a plan of action that you are comfortable with and that fits with your life.
How have student loans impacted your life? What proactive actions have you taken or will you take to deal with them?