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Managing Student Loan Debt

4 Tips to keep in mind

Young female businesswoman in the office

Graduating from college is an accomplishment to celebrate. However, if you are like many students these days, the celebration is quickly followed by the realization that you have student loan debt to pay off. Student loans have the reputation of being an insurmountable bogeyman, but the truth is, if you take action and stay on top of managing your debt, you should be able to pay it back responsibly. To that end, here are some tips for managing your student loan debt.

Collect the details.

It's common for students to graduate with several different loans from several different lenders, all with different interest rates and payment due dates. The first step in managing your debt responsibly is to collect all of the details about each of your loans in one place. Make a spreadsheet listing each lender, the amount currently owed, the interest rate, payment date, and payment amount. 

For the time being, once you have all this information compiled, you can either set up automatic payments for each loan, or you can set reminders in your phone, so you don't forget to make each payment on time. 

Look into income-based repayment if you're struggling.

If you are barely able to make your payments each month, then look into income-based repayment. Basically, you will need to contact your lenders and provide proof of income, and then they will lower the amount you must pay each month based on your income. Only do this if you truly cannot make your payments as currently scheduled; the longer it takes you to pay off a loan, the more interest you pay in the long run. 

Pay off your higher-interest loans first.

If you have money to spare each month, then paying extra towards your student loans will save you interest in the long run. Pay off the debt with the highest interest rate first. Make sure the extra payment is going towards the principal. There is likely a place to note this on your bill or online payment form. Even an extra $100 or $200 a month put towards your highest-interest loan can save you years of payments and potentially thousands in interest. Once your highest-interest student loan debt is paid off, you can then move onto paying the loan with the second-highest rate.

Look into consolidation.

When you consolidate your loans, you basically take out a new loan from a single bank. That bank pays off all of your individual student loans, and then you only have to make a single payment each month to that one bank. 

There are a few advantages of consolidating. It's easier to remember to make one payment each month than it is to make five or six separate payments. This single payment on the consolidation loan is almost always lower than the sum of your individual payments.

Consolidating your loans usually results in a lower interest rate, overall. However, you should compare the rates on your current loans to those being offered by your bank just to make sure this is the case. Also, note that consolidating sometimes means you lose your right to income-based repayment and deferment options. Only consolidate if you have a comfortable income and are confident you won't need to defer.

Graduating with substantial student loan debt can be a little intimidating. However, if you follow the steps above and keep pushing forward with your career, you will soon put this debt behind you. With options to consolidate or make income-based payments, student loans are quite flexible, and lenders are generally willing to work with you to find a reasonable solution. 

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