Updated on June 6, 2022
Student loans are commonly associated with frustration, stress, and massive debts. The first thing you should know is that you are not alone since student loan debt is a national crisis phenomenon.
America is now facing one of the most striking student loan debt crises in history. Don’t believe us? According to EducationData, the American student debt is over $1.747 trillion and affects more than 43.4 million students across the country.
However, these past few months have been a relief for those with federal student loans. First of all, the US Government paused loan payments and set interest rates to 0% during this time for federal student loan borrowers. This gave them the opportunity to rest from making payments or even the chance to catch up with old dues.
Secondly, some people believe that anywhere from $10,000 to $50,000 could be forgiven from their federal student loans, as President Biden has planned since he campaigned for the White House.
But there is nothing certain about that, and the pause on the student loan payments is about to come to an end on August 31st. And, of course, it’s always a complex situation for those with private student loans.
So, if you need to prepare for when the repayment resumes, or you are just looking for the best tips on paying your student loans in the best way possible, we have the solution for you.
Here at Gradehacker, we are the non-traditional student‘s most trusted resource. From our years of experience, we know firsthand how students struggle with financially managing to go to college.
Many feel like the majority of their budget goes to paying off student loans, and if you are one of them, here is the ultimate strategy on how to pay your student loans without feeling broke. Consider these steps to pay your student loan debt and get out of that gloomy financial crisis!
Knowing ALL Your Loans Will Avoid You Many Future Headaches
This sounds crazy, but many students take out loans without knowing the whole picture. Commonly, borrowers aren’t fully aware of all the loans they have taken until after graduation.
So, what can you do?
First, identify your lender.
If you have a federal student loan, you should be able to find it in the National Student Loan Data System. Here, you can check and confirm all the information regarding your federal loan.
In the case you have a private student loan, you should be able to contact your lender directly if you have any inquiries or doubts, or you can check your credit score report for that information.
By doing this, you will know all your outstanding loans and services, so you can organize yourself and find that specific loan information. Additionally, you can get a free credit report on the Annual Credit Report website to double-check that information.
Choose What Payment Options Suit You Best
Now that you know your loans and how much money you have to pay, this is the moment where you decide how you will pay your loans.
Know that there is more than one repayment option.
One way is to switch your loan to an income-based plan. This way, you’ll be paying about 15% of your discretionary income.
There are also other repayment plans, such as the Pay-As-You-Earn and Income–Contingent Repayment plans. You should know how much your loan interest rate is, recognize whether it is a fixed or variable rate, and evaluate which payment options offer you a realistic plan so that you can have a doable monthly payment based on your necessities.
Also, you can use the Federal Student Aid website to know which payment method will suit you best according to your income, family, and taxes.
And if you are not sure how to choose a student loan, you can watch our video!
Use Your Grace Period to Start Early
After you graduate, it is usual that your lender grants you a grace period where you don’t have to make any monthly loan payments.
Do not waste this grace period and use it to:
Follow these steps, and you’ll get used to paying a specific amount each month to your debt.
Budgeting Means More Money to Pay Your Debts
Create a budget!
Budgeting isn’t just a good habit during college; it’s useful throughout life. Create a budget by acknowledging your income and setting your fixed expenses. And include everything! From regular college costs to important everyday expenses.
Consider your priorities and act according to your debts. This will save you a lot of money, and you can use this habit to pay your debt faster.
You can find more valuable tips for saving money while living a college lifestyle in our college finances blog post.
Increase your income
Cutting off expenses is necessary to pay your debt, but increasing your income is just as important.
You can start by asking for a raise. You might not get one the minute you enter the workforce, but you can reach out to your boss or employer and ask what you can do to earn it. See how you can manage more responsibilities, perform more tasks, or improve your results.
Another option is doing other activities requiring less time and giving you a small income. Maybe you can consider getting a part-time job or taking extra shifts in your current position. You can also start a side hustle or take free courses where you learn new skills to expand your area of knowledge.
Avoid more debts, have a simpler lifestyle until you pay out your debt
This might seem like a logical step, but don’t be so surprised!
Believe it or not, many people consider making large purchases even though they haven’t finished paying for their student loans. From throwing a big wedding to buying a new car, these are nice events that most people desire but that no one with a loan debt should have.
Maybe these examples are a bit too extreme, but consider the small purchases, such as the daily coffee you buy when you leave home or trips to the mall and leaving with a few shopping bags.
We aren’t saying you can’t have personal expenses here and there, but think about how all of these purchases add up to your debt and how sooner you could end it by paying it first.
Just wait until you can actually afford the things you want to buy.
Successfully Pay Off Student Loans
Student loans can be stress-provoking and overwhelming. But remember, whether you have a federal or private loan, you are not alone.
These simple tips will help you successfully pay off your student loans. It’s all a matter of being smart and budgeting correctly. Think of the investment you are making towards your future!
We understand how overwhelming this aspect of college finances can be. We hope that these tips will change your experience paying off student loans.
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