Do you ever feel completely and perpetually stuck with your student loan debt?
Maybe you’ve switched your repayment plan, consolidated or taken another measure, yet still feel that there’s no way out?
Instead of being complacent, reach the end of your debt either by getting extremely aggressive with repayment — or by becoming strategically passive. Here’s how.
Extremely aggressive: When you’d benefit from attacking your student loan debt
As you would imagine, paying off your student loans faster than you originally planned comes with many perks. You could move on to other financial goals and forget about your debt, not to mention the emotional strain it might have caused. You would be free to divert more of your paycheck to savings, for example, or use your newly improved credit score to buy a home.
Fortunately, there are many tools at your disposal in attack mode. They include:
- Trimming your budget to the point of replicating dorm life, allowing you to throw every extra cent at your debt
- Opening up the lines of communication with your servicer to confirm payments are being applied correctly
- Signing up for autopay to receive a rate reduction, and ensure you avoid unnecessary fees and never miss a payment
- Choosing the debt avalanche or snowball method to whittle your loans down one at a time
- Making extra (large) payments when you receive a raise, tax refund or other financial windfalls
- Seeking jobs that offer repayment matching or starting a money-earning side hustle to increase your payment amounts further
- Refinancing your loans to a shorter repayment term and a lower interest rate
The faster you pay off your education debt, the cheaper it’ll be to accomplish. Say you have $50,000 tagged at 7.00% and are due to repay it in eight years. Paying it off in four years instead would take a lot of effort, but it would also result in a ton of savings — $6,900, to be exact.
How much could you save by attacking your debt? Try plugging some numbers into this calculator to find out.
Strategically passive: When you’d benefit from playing it slow with your student loan debt
Quickly paying off student loan debt isn’t possible — or even prudent — for every borrower. You might say that for some borrowers, taking the stairs is better than the elevator.
There are a few rewards for a gradual repayment, as long as you’re strategically passive. You might enjoy more breathing room in your monthly budget (though make sure you understand how interest accrues on your debt). In fact, you might decide to pay as little as possible now to receive more loan forgiveness later, via a program like Public Service Loan Forgiveness (PSLF).
To successfully slow down your student loan repayment, possible steps include:
- Applying for deferment or forbearance — or rehabbing a defaulted loan — while you get back on your feet
- Lowering your monthly payment via an Income-Driven Repayment plan (for federal loans only) or by refinancing
- Signing up for autopay to receive a rate reduction, and ensure you avoid unnecessary fees and never miss a payment
- Seeking federal loan forgiveness or loan repayment assistance programs via your state
Most student loan slowdown tactics give way to accruing, even capitalizing interest. Whether you defer (or pause) payments while you’re unemployed, make $0 payments under an IDR plan or refinance to a longer loan term, interest will be tacked onto your balance. Still, this could be the right path to take, particularly if some or all of your debt will be wiped away at the end.
Say you’re a teacher at a public elementary school earning $56,900, the median wage for that job, according to the Bureau of Labor Statistics. And thanks to borrowing for both your bachelor’s and master’s degrees, you’re weighed down by $80,000 worth of federal student loan debt, repaying it on an IDR plan at 6.00% interest.
You might be wise to make the minimum payment — as little as $323 per month and $46,633 overall — until PSLF cancels the remainder at the 10-year mark. (If you instead trudged forward paying $888 per month on a standard 10-year repayment plan, you’d shell out $106,580, including interest, and there’d be nothing left for Uncle Sam to forgive.)
Or, if the teacher in this example works in an underserved district, they could score $5,000 to $17,500 of Teacher Loan Forgiveness after five years of teaching.
And even if you’re not eligible for PSLF or other similar programs, you might still be better off moving strategically slow.
For example, if you earn a meager wage (hopefully, for a job you love), you could accept paying more interest overall in exchange for lower monthly payments and eventual forgiveness. All four IDR plans wipe away your balance after 20 to 25 years of payments.
Measure the trade-offs of your IDR plan by using the calculator that corresponds to your plan type:
Of course, if your circumstances change midway through your repayment — perhaps you receive a significant inheritance — you might switch to the extremely aggressive approach to end your debt once and for all.
Don’t get stuck in the middle
Ask yourself how you’ve been repaying your debt to date. Have you made an extra (large) payment one month only to forget to submit another the next month? Have you been just paying the minimum without an end in sight? Or have you been working toward loan forgiveness without confirming your eligibility for it?
Not having a plan is the worst of approaches to repaying student loan debt. You’ll spend more money than you would with the extremely aggressive approach and more time than you would following the strategically passive route.
Now ask yourself which of the two proven approaches fits your situation best:
- Extremely aggressive: If your income is on the rise and forgiveness isn’t foreseeable, you’re likely better off attacking your debt. That’ll be especially true if you have the credit (or a cosigner) to lower your interest rate via refinancing.
- Strategically passive: If you can’t muster monthly payments, lowering your dues would be wiser than increasing them. The approach could also be best if you’re working toward receiving partial or full loan forgiveness.
Settling on an approach is the hard part. You’ll still likely have years of payments ahead of you, but at least you’ve unfolded the road map.
Whether you elect to get there fast — or to slow down — the time to get going is now. It’ll be easier to stay motivated once you know you’re moving in the right direction.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|