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Our Guide to Conquering Student Loan Debt

September 25, 2017

Have you recently graduated college? Then you may be joining the ranks of over 43.3 million Americans who have student loan debt.  Graduates from the Class of 2016 will carry about $37,172 in student loan debt on average. 

There are countless statistics about student loan debt, but if there is one statistic you do remember, remember this one: The student loan delinquency rate is 11.6%. With average monthly student loan payments hovering around $351 a month—it can be difficult, if not impossible, for young people to stay on top of their student loan payments.


Graph Offered by the Wall Street Journal.

Don’t become just another statistic. Follow this simple guide to conquering your student loan debt:


Understanding What You Owe


Find Your Lenders

Are your student loans private, federal, graduate, or a mixture?   It’s important to find out. Students who have applied for loans four or more years ago may no longer remember every single loan. Most loan providers will contact you soon after graduation, but it’s important to do research of your own.

You can find your federal loans by visiting the National Student Loan Data System (NSLDS) website.  For private loans, check with your school’s financial aid administrator. In most cases, private loans will be listed on the Clearinghouse Meteor Network. They will also be reported on your credit report.

Organize the Information

Once you know who your lenders are, make a list of each of them, including the amount owed, the type of loan it is, the current balance owed, and the interest rate for each. Organize the information in a spreadsheet or on a piece of paper that you can revisit to reference and track your loans.

Set up online accounts for each lender. Most student loan servicers have online systems where you can track your balance and set-up automatic payments.

Understanding Grace Periods

After you graduate, you often have a grace period of several months (usually six) before you are required to make payments on your student loans. This grace period is there to give you time to find employment and save up money for your payments.

But remember that in most cases, your loans are acquiring interest whether you’re making payments or not.  That accrued interest is then tacked on to the loan’s initial principal, which increases the total amount you owe. Even if you can’t afford to make full payments on your student loan during your grace period, consider making interest payments during that time in order to save your money in the long run.


Financing Your Loans


Your Options

Student loan lenders offer borrowers many options when it comes to repaying their loans. These options include adjusting the length of your repayment term (10 years vs. 20 years), which will lower your monthly payments but increase the total amount of money you end up repaying. Other options are refinancing your student loans.

One option for refinancing student loans is to sign-up for an income-driven repayment plan.  This is an option to take if you’re monthly student loan payments are extremely high compared to your income. These plans keep your payment amounts to a percentage of your discretionary income. For most plans, that would be 10%.  

Borrowers who have a solid income and a good history with debt and credit will also be able to refinance their loans through private lenders. These options would include consolidating student loan debt down into one monthly payment at a lower interest rate. According to SoFi, “Refinancing a $100,000, 6.8%, 10-year term loan to 5%, your payments would go down to $1,060, and your total interest would be $27,278. In other words, refinancing would mean lower monthly payments and a total savings of almost $11,000.”


Payment Strategies


Failing to Repay 2.jpeg 

This chart from an April 2016 article in the Wall Street Journal shows the amount of borrowers with outstanding student loan debt.


Carrying a high amount of student loan debt from multiple lenders can make you feel as if creating a repayment strategy is impossible.  Don’t feel overwhelmed by Student Loan Debt by processing it in small chunks and prioritizing your payments.

If you feel that you need to refinance your loans and make reduced monthly payments, try to only make smaller payments to the loans with the smallest interest rate. Make full, larger payments to the loans that have the highest interest rate.

If you do find that you are able to pay more than your monthly student loan payment, instruct your servicer to apply your payments to the loans with the highest interest rate.

Make It Automatic

Don’t default on one of your student loans simply because you forgot to make a payment! Set-up automatic payments for all your student loans either by electronic payments through the loan servicer’s website, or through your bank’s Bill Pay program. Finger Lakes Federal Credit Union’s Online Bill Pay, allows you to pay your bills automatically every month.

Take It Slow

Conquering student loan debt is all about small battles, and taking care of your debt one step at a time. Don’t try to pay off all your student loan debt at once if you still don’t have enough money set aside in an emergency fund account or if you don’t have a retirement savings plan set-up. These things are just as important as paying off student loan debt. Make your payments on time every month, but don’t despair when the payments you’re able to make are small and seem (to you) insignificant. They’re not. They are significant payments, and every single one of them brings you one step closer to being free of student loan debt.

Life changes over the course of ten or twenty years, and while you may not be able to eliminate your pile of student loan debt right away, circumstances later in life may change that. The important thing is to keep yourself covered in every area of your life: that includes credit card debt, mortgage payments, car payments, savings account deposits, and retirement contributions. Every single one of these monthly payments are an investment into your financial wellbeing and a fiscally healthy future.