March 27, 2017

Ways to Manage Your Student Loans

Student loan debt is the leading household debt, according to the Consumer Financial Protection Bureau. Americans currently owe $1.1 trillion to student loans. Although students don’t technically have to start paying back their loans until after graduation, it’s a good idea to be proactive about the debt. Want to get a head start on paying back your loans? Try these tips for managing your student loans and reducing your monthly payments.

Ways to Manage Your Student Loan

Create a Budget

It takes discipline to establish and stick to a budget; however, this strategy ensures that you are in control of your finances and have enough money for the things you need, as well as some of the things you want.

The first step to creating a budget is determining your income. For budgetary purposes, your income is your monthly take-home pay – not including projected overtime or bonuses. List your expenses, including both fixed expenses, such as rent, car insurance, utilities and flexible expenses like food, gas and clothing. Allocate portions of your income to your expenses, which should be less than or equal to your income. If your income doesn’t cover your expenses, you need to reduce some of these expenses.

Any extra money left over after you’ve covered your expenses should go into a “rainy day” savings funds to handle unexpected costs, like auto repair bills or other unexpected expenses. Once you’ve adapted to living on a budget, check back regularly to ensure you’re sticking to your plan. Tweak anything that has changed such as utility bills that have fluctuated, lower auto insurance premiums or any other adjustments.

Estimate Your Student Loan Payment

Your loan holder will set your monthly payment based on the amount of money you’ve borrowed for school. The interest rate will depend on the type of loan you take out, and when you get the loan. If you haven’t yet started paying back your loans, use a loan payment calculator to estimate your monthly payment and total cost of interest.

Keep in mind that your student loan payment should be less than eight percent of your gross pay. The calculator will give you an idea of the type of salary that you should strive for in order to adequately manage your monthly payments and the rest of your expenses.

Once you get on a monthly payment schedule, be sure to stay up-to-date on the status of your student loan by checking your account regularly. Here’s where your mobile devices can come in handy — you can check the balance and make payments on your 2013 new phone.

Look Into Alternative Federal Repayment Programs

You have the option of petitioning your loan servicer for an alternative federal repayment program. Alternative federal repayment programs will reduce your monthly payments but increase the amount of interest that you pay, making the loans more expensive over time.

If approved, you could qualify for:

  • Graduated repayment: Your monthly payment progressively increases over a 10-year period.
  • Income-based repayment: Your monthly payment is capped at 15 percent of your income (up to 25 years).
  • Extended repayment: Allows you to pay your loan off over 25 years.
  • “Pay As You Earn”: Only available to certain individuals who can prove financial hardship and who took out loans after October 1, 2011; limits monthly payments to no more than 10 percent of your monthly income for up to 20 years.

Consolidate Loans

Making monthly payments to multiple lenders is an administrative headache. One strategy to manage your loans more efficiently is to consolidate them. You can’t consolidate federal and private loans together, but you can consolidate multiple federal loans into one loan, and multiple private loans into another. Keep in mind that consolidating loans can reduce the amount you owe monthly, but increase the overall interest rate, which may not be the best financial decision. If you decide not to consolidate, experts recommend paying off the loan with the highest interest rate first.

Follow these tips and managing your student loan will be easier than you think.

Series Navigation<< 6 Credit card mistakes that can put college students in debtWays to Prepare for Being a Broke College Kid >>
About the Author: Jessica Oaks (13 Posts)

Jessica Oaks is a freelance journalist who loves to cover technology news and the ways that technology makes life easier. She also blogs at FreshlyTechy.com. Check her out on Twitter@TechyJessy.


Share your comments with us...

*