Understanding how to take control of your student debt can reduce stress and may even save you money in the long run. Don’t let a mountain of student loans overwhelm you. Follow these tips to create a plan you can live with.
Student Debt Video Transcript:
There’s no question about it, facing a mountain of student debt is daunting. The financial aid office is conveniently there to help you take out the money, but by the time the first statement arrives, most borrowers are on their own.
Understanding how to navigate the system can reduce stress and may even save you money in the long run.
The first step is to get organized. For each loan, identify your outstanding balance, interest rate, minimum payment and due date. If you can stomach it, link your loans to your Mint.com account for automated tracking of what you owe. If seeing the balance gives you chest pains, then keep the information organized in a spreadsheet that you only open occasionally.
Make sure to differentiate between your federal loans and your private loans. If you ever decide to consolidate or refinance, you’ll need to treat those separately.
Once you’re clear on what you owe, create a plan for tackling your payments. You can usually save a quarter of a percent by setting up an automatic payment from your bank account each month. Make sure to do this for the minimum payments on all of your loans.
If you have extra cash that you’d like to put towards paying off your student loans more quickly, target your highest interest rate loans first. Contact the lender directly and specify that you’d like to make an additional payment towards the principal of that specific loan.
It’s important to take advantage of free resources that are available to borrowers. Sites like FinAid.org and IBRinfo.org have fantastic information and calculators to help you understand your payment options. It’s also a good idea to speak directly with your lender’s customer service representatives. Ask as many questions as you need to. If you initially reach someone who woke up on the wrong side of the bed, politely disconnect and call back to see if you can get someone more helpful.
Student loans can be overwhelming, but try to remember why you have them. College is a necessary step for many career paths, and usually an enjoyable time as well. Rather than dwelling on the money you owe, try to focus on your income earning opportunities and the great memories you made.