Student Loan Debt Part 2: Payback Time

[J.J. Montanaro USAA]

Last week I pointed out that “According to the Federal Reserve¹, Americans owe more than one and a half trillion dollars in student loan debt, and each year, graduates leave campus with more.”  What happens when real life begins and it is suddenly payback time? These five tips will give you a leg up on beginning the road to paying of your student loans.

1. Look for a special program. There are state and federal programs that could allow you to forego paying back part of your outstanding loans. There’s the Federal Public Service Loan Forgiveness Program for those that serve in the public sector (including the military) or with a non-profit. Health care and education professionals may have options for forgiveness or special awards, typically when serving underserved communities. In addition to scholarships and world-class education benefits, there are military programs to help with loan repayment.
   
   
2. Federal income-driven repayment plans. There are a host of repayment plans for federal student loans that can mitigate the month-to-month burden of student loan repayment. Check them out and take advantage.
   
   
3. Consolidation can provide breathing room. You can consolidate your Federal student loans. With a loan consolidation, your interest rate will be the weighted average interest rate on the loans you are consolidating, so there’s no savings on that front. However, you’ll have one payment and you may be able to extend the repayment term to reduce the monthly payment.
4. Check out a refinance. If you’ve got private student loans, you may be able to lower your interest rate and save money by consolidating and refinancing your student loan debt. Of course, the feasibility of this option depends on the current interest rate environment and your own personal financial situation. While you may also be able to refinance your federal student loans, tread carefully here, because if you do this, you would give up the benefits they provide (PSLF, income-driven repayment options, etc.).
5. Pay a little more than required. Depending on your situation, an extra $50 or $100 each month can take years off your repayment schedule. Make an effort to trim in other places to boost what you’re sending to your student loans.

Are you paying off your student loans? Share your advice in the comments.

Related Link:

Student Loan Debt Part 1: Before and During

About the Author: JJ Montanaro is a Certified Financial Planner® professional and part of the Military Affairs team at USAA. He’s a graduate of the U.S. Military Academy and has over 20 years of financial planning experience.

* Disclosures: "Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements."

 The information contained is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional advice before acting on any information you may have found in this article. This article in no way attempts to provide financial advice that relates to all personal circumstances.

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