Student loan debt is one of the most significant aspects of contemporary American financial life. According to The Economist, total U.S. student loan debt surpassed $1.2 trillion in 2014, and over 7 million borrowers are in default. There are approximately 44 million people with student loans who have an average outstanding loan balance of $37,172.
Here are 5 Proven Strategies for Tackling Your Student Debt:
Pay More than The Minimum Payments on Your Student Loans
If you can afford it, the simplest way to start chipping away at your student debt is to make more than your required monthly payments. It doesn't have to be a crazy amount extra. Start out paying an extra $20.00 each month, and slowly increase that amount over time. That way, you create a habit out of paying extra, and ultimately get to a place where you are making a serious dent in your debt.
Consolidate and Refinance Your Student Loans
In recent years, consolidating and refinancing student loans through private lenders has become more and more popular. Many of these private lenders offer attractive interest rates, particularly for people with graduate student loans, which can significantly decrease monthly payments. However, keep in mind by transferring your federal debt to a private lender, you are reducing your options of forbearance and income-based debt repayment, among other benefits.
Apply Your Raises Toward Your Student Loan Debt
If you get a raise at work, start applying 50% of that raise directly toward your student loan debt. You can do this by setting up a savings account that is specifically for debt repayment, or by paying extra on your monthly payments. Either way, this strategy enables people to benefit from increases in income while also paying off debt faster.
Set Up Automatic Payments For Your Student Loans
Automatic payments take all the guess work out of student loan repayment. They also eliminate the possibility of missed payments, fees, and unnecessary interest charges. By automating your student loan payment around the time of your paycheck, you also help ensure that your spending stays in line with your budget. Additionally, many loan providers offer a discount on your interest rate if you sign up for automatic payments.
Pay Toward Your Student Loan Debt Every Two Weeks
Rather than paying monthly, try splitting your payment in half and paying that amount every two weeks. This not only eases the pain of each payment, but by following this strategy, you end up paying the equivalent of an extra monthly payment each year. Over time, this can shave years off of your debt repayment.