Top 5 Strategies to Paying Off Student Loans

According to the College Board, the average coast of higher education has increased by a staggering 130% over the previous two decades. To put it in perspective, in this day and age certain private institutions, like Sarah Lawrence, cost well over $40,000 for one single semester. Yes, college students are facing higher tuition costs than ever, and more and more young people are going into debt to accommodate these rising costs. According to experts, the number of kids taking out student loans has doubled over the last decade. This is because grants and scholarships simply can’t keep up with the tuition hikes.

With so many young people graduating in debt, the question then becomes how best to get out from under that debt in so they can then begin to plan for other things, like retirement. With that in mind, here are some quick tips geared towards helping recent – or even not-so-recent – grads get their financial house in order and pay off those student loans.

Confront debt head on

Ask many recent grads exactly how much they owe in student loans, and many are likely to reply, rather sheepishly, they simply don’t know. The very first step to attacking debt is to face up to all of it. Those in debt can visit the National Student Loan Data System for a detailed view of exactly how much they owe in federal loans as well as the accumulated interest. From there, formulating a payment plan should be a breeze.

Select a repayment plan

Although the typical repayment plan for a student loan is 10 years, it is not a one-size-fits-all policy. The best thing is for students or grads to tailor a plan that suits their lifestyle and means. Oftentimes people find that income-based repayment is a workable solution. The point is that those who take out student loans should experiment with as many repayment options as possible until they find the one that works.

Pay off private loans first

This may seem counterintuitive when interest on private loans is less than that on federal loans. However, any improvement in the economy is going to cause a steep increase in private loan interest rates – possibly even climbing 5-6 percent over a four-year period. Experts recommend that graduates, whenever possible, pay double the required amount per month until the private debt is paid off. Then they can focus on the government loans.

Consider employer compensation packages

It’s true that the job market is still anemic; many kids are still moving back home right after graduation from college. But there are midsize companies looking to staff those employee rosters. And without the bankroll of some larger firms, these smaller organizations will sometimes offer a lower wage in exchange for a student-loan payout. It’s something any recent grad should consider during salary negotiations for that new job.

Consider debt consolidation

This is mostly applicable to those who graduated prior to 2006, before federal loan rates became fixed. However, those who would like to streamline their debt in order to keep it all straight and in one place – and avoid the late fees that come with having overlooked this loan or that loan – can consider consolidation.

The above methods should prove to be a useful roadmap for those who want to make student-loan debt reduction as painless a process as possible. Ultimately, the real trick isn’t merely formulating a plan, but being diligent in the execution of that plan as well.

Rachel Eagan is a professional blogger that shares financial advice and information to consumers. She writes for TitleMax, which provides auto title loans a bad credit check title loans.

 

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Category: Student Loans