Handling Student Loans (the Debt Crisis and How to Manage It)

Handling Student Loans (the Debt Crisis and How to Manage It)

October 22, 2020

The student loan burden is a reality that's really not news. With the student loan debt at $1.6 trillion and rising in the U.S., plus the effects the COVID-19 crisis had on incomes and markets, it's no wonder more and more people find it difficult to handle their repayments. 

Dealing with student loan debt is harsh, as the average student debt is a whopping $35,397, according to figures provided by the Department of Education. If you feel like you're drowning in student loan debt, your anxiety is likely to be augmented by the current economic crisis. 

The good news is that there are a couple of things you can do to take control of the debt and make it more manageable. Here are some tips to help you handle student loans. 

  1. Determine Exactly How Much You Owe 

As in the case of any other debt, it's important to know exactly how much you owe. Most students graduate with more than one loan, as they may have taken out both federally sponsored and private loans. Sit down and do the math to determine how much money you owe and at what interest rates. This is the first step when it comes to developing a plan to repay your student loan debt. 

  1. Look Into Your Early Repayment Options 

The two options you have once you determine how much you owe are paying off the loans ahead of schedule or making the minimum payments. The majority of student loans default to a 10-year repayment plan, and while many people make extra payments to clear their debt sooner, this might not be the best option for everybody.

 Student loans generally have low-interest rates, so if you have other debt at higher interest rates, you may want to pay that off first. The interest on student loans might also be tax-deductible in some cases, so it's worth considering your individual situation before making early repayments. 

  1. Eliminate High-Interest Credit Card Debt 

This is something that you should be aiming to do even if you don't have student loans, but it's especially crucial if you're struggling with student loan debt as well. Try to pay off the loans with the highest interest rate first, then tackle the rest. A debt payment plan is your best friend if you're juggling multiple debts. 

Refinancing is another thing to consider if you're struggling to make minimum payments. Moving some of the debt to 0% interest credit cards can give you some room to breathe and help you clear the debt quicker.

 Decide on the Right Payment Plan 

There are generally several payment plans to choose from, including multiple income-based plans, a standard 10-year plan with fixed monthly payments, and plans that allow your payments to go up slowly over time. Do your research to pick the best plan for your circumstances, always considering the interest you're going to pay in the long run. For example, if you decide to switch to a longer repayment timeline, your monthly payments may be lower, but you'll likely end up paying more interest overall. 

  1. Enroll in Automatic Payments 

Multiple student loan lenders offer discounts on interest rates if you set up automatic payments. These are taken from your checking account every month, and besides benefiting from a discount, you can also relax knowing you don't have to mail a check every month. 

When dealing with student loans, it's important not to allow them to mess up your finances. Always try to keep the payments affordable, and don't be afraid to ask for help if you feel like you're drowning in debt.