Student loans are a burden many people face today.
Student loan debt has skyrocketed past $1.4 trillion recently.
College graduates continue to graduate with record-breaking student loans.
Many people don’t have any idea how to get their student loans under control. A huge student loan balance can leave people feeling overwhelmed and paralyzed as to what to do.
You often don’t get to live the life you imagined. Student loan debt has forced many to put off marriage, going on vacations, and home ownership.
High cost of living and stagnant wages add to the problem.
If you’re overwhelmed by your student loans, consider taking the following actions to get your student loans more manageable.
Understand Your Loans
The first step to making your student loans less overwhelming is to get clear on the amounts, interest rates, minimums, and repayment length.
Use our free student loan tracking spreadsheet to input all the details of your student loans.
It doesn’t matter whether you have $20,000 or $100,000 of student loan debt. Laying out all the details for your loans helps you get a clear picture, which also helps you decide on the best course of action moving forward.
Consider Consolidating or Refinancing
Consolidating your loans doesn’t allow you to save money on interest by getting a lower rate. Your new interest rate is taken from the weighted average of your previous loans and rounded to the nearest one-eighth of one percent.
If you have several federal loans, consolidating can simplify your repayment by combining all of your loans into one so you only have to make one monthly payment. No more having to remember different loan details and payment amounts.
You can consolidate your Federal student loans through the Department of Education via the Direct Consolidation Loan.
Refinancing your student loans through a company like SoFi, could give you a lower interest rate and potentially save you thousands of dollars over the course of repayment.
Consolidating or refinancing your student loans can help you manage your payments better however the decision to do it shouldn’t be taken lightly.
If you have mostly private student loans, refinancing can be a way to get a lower interest rate.
However, if you have mostly federal student loans, consolidating or refinancing means losing out on options like income-based repayment, extended repayment, graduated repayment, and loan forgiveness options.
Understand Your Federal Benefits
As mentioned above, if you have mostly federal student loans, there are different repayment plans you could qualify for.
The standard 10-year repayment plan is the most common one. Others include graduated repayment, extended repayment, and loan forgiveness.
The Graduated Repayment Plan involves having a lower monthly payment at the start. Increases happen every two years and the repayment period is 10 years.
The Extended Repayment Plan lengthens your repayment period to 25 years. The monthly payment can be a fixed or graduated amount.
Income-Driven repayment plans are tied to the income you make. If your minimum monthly payment is high in comparison to your income, you could qualify.
These extended repayment plans can be good if you’re struggling to make the minimum payment on your student loans. The downside is you will pay more in interest over time than if you picked a shorter repayment period.
If you’re on a plan that forgives the remaining balance at the end repayment, you still have to pay taxes on that forgiven amount.
Sign Up For Auto-Pay
Most lenders have an option to auto-pay your student loans monthly. As an added incentive, they usually give a 0.25% reduction to your interest rate.
This may not seem like much, but every bit counts. Just make sure you have enough in your bank account to cover the auto-pay amount to avoid any overdraft fees.
Track Your Progress
Consistency is important in personal finance. Keeping track of your progress allows you to stay motivated and have a better shot of hitting your goals.
You can track your progress via pen and paper or through a free tool like Personal Capital.
Personal Capital is a financial management service that allows you to track your assets, liabilities (this includes your debt), and get a full picture of your finances.
Seeing your full amount of student loan debt can potentially cause feelings of resentment and regret. You wonder how to manage your debt and if it was even worth it.
Regardless of whether you have a little or a lot of student loan debt, don’t ignore the situation. Use it as motivation to take action.
How do you prevent yourself from getting overwhelmed by student loans? What actions have you taken to make your situation more manageable?