How to Pay Off and Conquer Your Student Loan Debt

Do you have debt from student loans? If so, you’re not alone. About 45% of college graduates have student loan debt. With some effort on your part, you can conquer your student loan debt – so you can use that money for other things.

Know What You Owe

Chances are you have more than one loan and they all have different interest rates. It’s boring, but read each loan through. As you go, write down:

• The balance of each loan
• Each loan’s interest rate
• Whether the rate is fixed
• Federal or private loan
• If there’s a forgiveness option
• Where you’ll be sending payments
• Who you’ll be paying
• Contact information for each loan
• Payment dates for each loan
• When you have to begin paying
• The minimum payment for each

Conquering Student Loan Debt

Double-check that you haven’t forgotten any loans. This process should give you a clear idea of what you owe, what can be forgiven, who you’re sending payments to and what your minimum payment will be each month when you total them up.

It doesn’t stop there. When you find a job, consider what you can afford to pay each month. If your minimum payment totals up to $250 and you can afford $300, pay the $300. That’s an extra $50 per month over the course of at least 10 years, roughly $6,000, saving you a lot of money interest.

Consolidating Versus Automatic Debit

If you have lots of loans – and again, you probably do – consolidating could be an attractive option. It will let you make one monthly payment instead of several payments. That’s appealing.

But that doesn’t mean it’s a good idea.

You cannot consolidate private loans under federal loans. Private loans will consolidate your federal loans, but you’ll get hit hard by interest and you’ll lose of the benefits of the federal loans.

What types of benefits? Depends, but they could include loan forgiveness for:

• Entering law enforcement
• Teaching science classes
• Deploying with the military
• Joining the peace corps
• Teaching in low-income areas
• Working as a nurse for two years

However, for some of these situations, your entire loan will not be forgiven, only a percentage will be.

With all of that in mind, most experts recommend NOT consolidating loans unless they’re the same type of loan, like all private loans. Instead, keep track of each individual loan and make payments on it.

Don’t Wait to Start Paying

That grace period is nice and it can be super tempting to use all of it. Don’t. The moment you get a job, begin making payments toward each of the loans.

Consider putting money into a checking account that’s separate from your main checking account and using that to pay off the loans. By putting part of every paycheck in, you’ll be able to pay off those loans without even thinking about it.

It’ll be automatic, which will be easier for you in the long run. Most companies that use automatic payment will allow you to set up your payments so a percentage can go to more than one account.

Make Financial Sacrifices

It can be really easy to stop by McDonalds on the way to work, on the way home, or during lunch.

Don’t do it.

That doesn’t mean don’t go out to eat. It means skip the small purchases that add up when you’re not paying attention. Going to McDonald’s 5 times a week and spending an average of $4 means that in a month you’re spending $80, probably without realizing it.

Instead, plan to go out with friends two times per month and spend $20-$25 each time. You’ll enjoy it more, you’ll spend less and you can put the extra money toward your loans.

If coffee is your go-to, buy a coffee maker and schedule it to brew coffee in the morning so it’s ready to go when you are. Then, allow yourself a visit to your favorite coffee shop once per week.

There are other ways to cut expenses out of your budget, too. For instance:

• Skip cable or satellite TV and get Hulu and Netflix instead ($8 – $11 for each compared to $55-85/month)
• Choose the lowest cell phone plan available, with the smallest amount of data (or no data)
• Get internet service in your home for your computer instead of using it on your cell phone
• Rent a place with friends after college so you are all paying less on rent, bills and utilities
• Eat most of your meals in and pack a lunch to bring with you to work most days

Creating a budget will allow you to see where you’re spending more money than you realize and give you an idea of where you could cut back. Then, make sure you’re putting the extra money toward your loans. The best way to do that?

Make a one-time payments (or several extra payments) to the loan with the highest interest rate each month.

Budget Extra Money for Emergencies

This may not seem like it has a place in an article about mastering student loan debt, but it does.

Maintaining an emergency savings account protects you and your budget because when the unexpected happens, like car accidents, hospital visits, becoming unemployed, or home repairs, you have the money to pay for them and you don’t need to worry about how you’re going to pay for or borrow money for your other expenses, like your student loans.

The best way to conquer your student loan debt is to pay more than you’re required to pay each and every month. Anything you can do to meet that goal will decrease what you pay in interest and give you excess cash later when you want it to take a vacation, plan your wedding, start a family or buy a car.

When you know what you owe and create a plan to pay it off quickly – taking the unexpected into account – you’ll be well on your way to conquering your student debt.