Effective Ways to Curb Your Student Loan Debt Today

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Brian O'Connell

By Brian O'Connell

January 15, 2019

An ounce of prevention may be worth a pound of cure when it comes to student loans, but, once you borrow the money, the debt is water under the bridge. Yet, there are a few ways to deal with the debt now, even after the fact.

Borrowers Wish They Had Done More to Limit Student Loan Debt

Surveys show that almost three-quarters of student loan borrowers wish they were more aggressive about addressing their student loan debt before that debt became a significant problem.

Another two-thirds of borrowers say that their student loans stop them from saving as much as they’d like. Not saving enough money early on in life is a toxic financial habit, since it limits the opportunity for earnings to compound. If college graduates don’t get into the habit of saving, it may become more difficult for them to save as they get married, have children and buy houses – leaving less money available for savings.

Yes, hindsight is 20-20 and there’s no doubt that addressing a problem early is the best way minimize any headaches down the road. That’s why most new homes have sprinkler systems – you don’t want to wait for the fire department to show up to save your home from being engulfed in flames that started with a small kitchen grease fire.

The good news? Even if you didn’t take proactive steps to curb your student loan burden before accepting the debt (like saving more money for college in a 529 college savings plan), there are ways you can mitigate student loan debt while in college and well out of it.

Fast-Tracking Your Student Loan Debt Payoff

Start with these four action steps and see if they give you a better grip on your college loan repayment experience.

Get a head start in college. Cutting into interest payments while you’re still on campus may sound like a tough financial task – but it is well worth the effort.

Consider a Federal Direct Student Loan of $30,000, at 6% interest, repaid over a 120-month period. Over that time, the total interest paid would be about $9,967.

Even if you could steer just $50 per month toward the loan during the four-year in-school period, you would save well over $500 in extra interest payments, and avoid interest capitalization after you leave college.

Getting a part time job, selling items on Amazon and eBay, or talking one’s parents into helping out with the payments are all doable – and worth doing if you want to get ahead of onerous student loan debt.

Check your minimum monthly payment on your loan and exceed it – every month. Student loans, like credit cards, come with minimum monthly payment requirements. Paying extra on those monthly payments can be a big help – but only if you do it right.

If you send an extra $100 per month beyond the minimum loan payment, good for you. But know that just adding the amount to your payment and clicking “send” isn’t going to help reduce your student loan debt as much as you think. Without instruction, student loan services will apply the extra cash where they see fit – as an early payment of the next installment or spread out across multiple loans, for example.

Your best bet is to contact your student loan servicer directly, and let them know how you want them to apply your extra payment. Specifically, that you want it treated as an extra payment, not an early payment, and that you want it to be applied to a specific loan, the loan with the highest interest rate.

The Consumer Financial Protection Bureau offers a good sample “extra student loan payments letter” to show you how it’s done.

Make (at least) an extra payment every year. Once a college graduate enters the working world, he or she may well run into one of the best professional workplace perks – the year-end bonus. Whether it’s $500 or $5,000, there’s no law that says you have to spend the year-end bonus (or salary raise, for that matter.)

Instead, apply some of the bonus cash to an extra monthly student loan payment – or two. Again, talk to your loan servicer and direct how the extra payment should be applied. Do this over the course of repaying your student loans and you’ll pay down the debt much faster.

Avoid late fees. This step sounds simple enough, but in real life, sometimes it’s easier to blow off that student loan payment when there’s only $200 in the bank and a weekend trip up to Boston is on the calendar. Too often, it’s the trip that becomes the priority, and not the student loan payment.

That’s human nature and, in some ways, that’s understandable, too. But doing so only adds to your student loan woes and here’s why. When you pay late (or don’t pay at all), you’re adding late fees and penalties that just stack up your student loan debt.

Depending on your student loan deal, your loan servicer can start adding fees to late payments as soon as 15 days after the payment was due.

The fees aren’t paltry, either – often 6% of the late payment, adding some serious bucks to your total bill if you continue to pay late over the course of the loan.

Keep paying your student loan bills on time, and get a “two-fer” – no added fees, faster pay downs, and better credit.

You might find it helpful to sign up for auto-debit, where the monthly payment is automatically transferred from your bank account to the lender. You will quickly get used to having less money in your bank account, and you may even get a small discount from the lender, saving you more money.

No Time Like the Present

As long as you’re diligent, creative and employed, there’s really no good reason not to apply at least one of these tips to curb your student loan debt, and get it paid down faster.

That outcome saves money, improves credit, and gives you a valuable life lesson you can pass on to your own friends and family – good financial habits lead to a better quality of life.

That goes double when you’re paying down student loan debt.

A good place to start:

See the best 529 plans, personalized for you