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6 Ways To Handle Your Student Debt

By Aja Frost Aja Frost

What do seven in 10 college graduates have in common? Student loans. We’re not talking small ones, either: according to the Project on Student Debt, the average debt is $28,400. Add in high-interest rates, and student loans can seem even more unmanageable.

Good news: Paying off your debt isn’t fun, but it is doable. Check out our seven suggestions for regaining control of your finances—and your life!

1. Know All the Details

It’s common to have multiple loans from multiple lenders, which can make keep track of whom you owe payments to pretty confusing. Set up a spreadsheet with separate columns for every loan, including the name of the lender, the original loan, how much you still need to pay off, the interest rate, and the minimum monthly payment.

2. Figure Out a Strategy

Simple math dictates you should pay off the loan with the highest interest rate first. Using this technique, if you had a $3,500 federal loan with a 9% interest rate and a $10,000 private loan with a 15% interest rate, you’d concentrate on the second, and ultimately pay less interest.

However, many experts actually suggest paying off your loans in order from smallest to largest. Paying off your first loan will give you a “quick win,” empowering you to move on to the next, and the next, and the next, in a snowball effect.

Choose the approach that fits most with your personality. If you’re very rational, use the first. If you’re emotional, use the second.

3. See If You Qualify For Tax Benefits

The student loan interest deduction lets you deduct—in other words, reduce the total amount of income you’re taxed on—up to $2,500. To be eligible each year, you just have to pay interest on a qualified loan (one you used specifically for higher education expenses.)

If you paid more than $600 in interest, the government would automatically send you a form. If you paid less, you’d have to request one.

For those still in school, there are two tax benefits available: the Lifetime Learning Credit and the American Opportunity Credit. These are pretty similar: they reduce the amount of taxes you have to pay. Paying for higher education expenses qualifies you each year.

4. Consider Consolidating Your Loans

When you consolidate your loans, you’re combining them into one single loan with one single payment. Federal loans can be consolidated at Studentloans.gov, and if you want to consolidate private loans, you’ll need to talk to a bank.

What are the benefits of consolidation? First, it’s much less of a hassle only dealing with one payment every 30 days, rather than two or three or even five. Also, you’ll get much more time to pay off your loans—meaning you’ll be parting with less cash every month.

There are some downsides. Since the repayment period is extended, you’ll rack up more in interest. Over the long run, you might end up paying more money. Also, you might lose “borrower benefits” from your original lenders, like interest rate discounts or principal rebates. Before deciding to consolidate, make a pros and cons list to decide which scenario is the best for your wallet.

5. Sign Up For Auto-Pay

It’s always difficult to choose the long-term gratification of paying off your debt over the short-term pleasure of a dinner out or a new shirt or a fun trip. With auto payment, you won’t have to choose—every month, a fixed amount will be taken out of your savings or checking’s account and delivered to your lender.

This option, also called direct-debt, is great as well if you routinely forget to make payments or find the process annoying.

You can choose to make the minimum payments on your debt (which often just covers the interest), or if you’re ambitious, you can set your auto pay to above the minimum, so you’re also chipping away at the principal debt.

As a bonus, many lenders offer a slight decrease in interest rates (around .25% or .5%) when you sign up for direct debit.

6. Look Into Alternative Options

In the past couple years, there’s been a rise in programs dedicated to helping students with their debt.

For example, crowdfunding sites like GoFundMe and Indiegogo allow current and former students who are are struggling to pay their bills a public platform for raising money. Zerobound lets people pay off their loans by volunteering.

If you like the idea of doing some good while simultaneously improving your financial situation, check out AmeriCorps. More than 75,000 people help their communities through this national service program. While you’re participating, you’re eligible for loan forbearance, which means you won’t have to make any payments. Also, once you finish your service, the government will pay off some or all of the interest that accrued during that period. You can even get an education award to help pay off your debt.

Use some—or all of these strategies to manage your student debt. At first, student loans are intimidating, but if you’re smart about paying them off, you will have nothing to worry about.


Aja Frost

Aja Frost

By day, Aja is a senior at Cal Poly San Luis Obispo in California, and by night, she is a highly successful freelance writer and content strategist. Two years ago, she was writing for Cal Poly's student paper. Today her work is regularly featured on Forbes, Inc., Mashable, TIME, The Huffington Post, The Daily Muse, Newsweek and the Billfold just to name a few.

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