It’s been nearly three years since I graduated from college and as depressing as it sounds, I have a long way to go before making a dent in my student loan payments.
Although being financially secure is a primary goal of mine, I struggle with the impact my wallet takes every month when student loan payments are near.
According to a recent study in 2018, Americans today owe more than $1.5 trillion on student loans, which doesn’t include credit cards or auto loans. Looking at the numbers, it is safe to safe that many of us have the same concerns when it comes to paying off debt.
Where exactly do I start?
Creating a payoff plan that works for you
From what I’ve been told from the few people I know who paid off their student debt, the best thing you can do is to confront your student loan debt as soon as possible and make a long-term plan for how you to pay it all off.
Ideally, you would do this after graduation where many federal loans do not require payment. But even if you’ve already been paying on your student loans for a few years and fell short, it’s never too late to pick up where you left off.
The first step in making effective student loan payments is deciding whether you are comfortable managing multiple student loans or whether to consolidate them into one larger loan.
When determining whether to consolidate or make multiple payments, you want to consider the following:
- Who is your loan lender?
- What is the loan amount?
- What is the current loan balance?
- How much are you willing to pay (monthly)
- Term of the loan (how many years will it take you to pay off debt)
- What is the APR of the loan (annual percentage rate)
- When are payments due?
Consolidating your federal student loans can make life easier because you’ll have one or two loan payments instead of a dozen. In some cases, consolidation can also lower your interest rate if you choose to take this route.
If you intend to stick it out with multiple loan payments, make sure you have your due dates organized. You may also want to consider making your payments all on the same date as to not cause confusion with other bills that may fall on different days throughout each month.
The term annual percentage rate (APR), is the interest rate for a whole year, rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc
If a few of your loans have much higher interest rates than the others (this is common if you’ve taken out private student loans, which tend to have higher APRs than federal loans), you might consider repaying some of this debt early.
Student loan Pro-tip:
If you can send in larger student loan payments to pay down your loan balance faster without penalty. This saves you money on interest and will pay your loan off faster. Loans with interest rates greater than 7 percent are good candidates for early repayment.
Taking the time out to understand your student loans and how much you owe is crucial when creating a payoff plan. There are a lot of options available for those looking to get a fresh start on your finances.
If you are unsure of who to contact in reference to your student loans, visit studentloan.org for more details.