It’s hard to think about anything else when you have student loans hanging over your head. Your life becomes about paying back that debt as soon as it’s in your hands—and when the payments don’t work out and you’re left with no way out, it can be all too easy to panic. But there are ways to get out of debt; they take time and smart thinking. If you’ve been struggling with student loans, here are some tips for getting out of student loan debt:
Best Tips to Recover From Student Loan Debt
If you are lucky enough to get a tax refund every year, do your best to pay off any student loan debt you may have. You know that’s easier said than done — but if you can put at least some of the money toward your loans, it will be well worth it.
Another use for your tax refund would be to pay off high-interest credit cards. If this isn’t an option for you either, consider using part of it as seed money for an emergency fund.
- Loan consolidation: This option is the best choice for borrowers with multiple loans who are struggling to make payments. Consolidation will combine all of your federal and private student loans into one loan, which means that you’ll only have one monthly payment and interest rate to keep track of.
- Income-driven repayment plans: These programs allow borrowers to lower their monthly payments based on their income, family size and state of residence. They also include options like Public Service Loan Forgiveness (PSLF), which allows those working in public service positions to have their remaining balance forgiven after 120 payments over 10 years. SoFi experts say, “Be mindful that the forgiven amount may be considered taxable income by the IRS.”
Consolidation and refinancing are two ways to reduce your monthly student loan payments. First, consolidation combines multiple types of federal student loans into a new, single loan that has a lower interest rate. Refinancing is when you replace one type of federal or private education loan with another type from a different lender. Both options might help you lower your monthly payment, but they could also have drawbacks for your credit score and future borrowing power.
Consolidating federal loans may make it easier for you to repay them because all your payments will go toward one loan instead of several. It also reduces some paperwork since all prior loans are paid off at once; however, it can negatively affect your credit scores if you don’t keep up with the new loans. If consolidating works out poorly for you financially or otherwise, the government allows borrowers to cancel their consolidation after two years by paying off all their remaining balances in full.
If you can afford to make extra payments on your student loans, it’s a good idea to do so. Think about how much money you have left over after paying for essentials (food, rent/mortgage, utilities). If there’s enough spare cash after those expenses, try making an extra payment on your student loan. This will help reduce the principal balance faster and save money in interest payments down the line.
In order to properly manage your student loan debt, it’s important to keep a close eye on your finances and make sure you are spending efficiently. Paying off loans early can be a great investment in yourself and your future financial stability.