3 Smart Ways to Reduce Student Debt

Photo by Alice Pasqual

Student debt forms a huge part of a graduate’s finances and reducing it is a challenge that affects anyone who should pay back loans incurred while in college. There are 17 million student borrowers in the US according to the Federal Reserve with $376.3 billion debts. The average monthly payment of a borrower under 30 is $351. That means that the average loan is $22,135 per person in this age group. Millennials feel the most pressure preventing them from purchasing a home or starting a business. Although it is not easy to manage college loans and still have something to eat at the end of the day or clothes to put on your back, playing smart when it comes to student’s liabilities can ameliorate the situation.

Refinance and Consolidate

One of the most obvious solutions is to find ways to consolidate and refinance your loan. The concept is simple, you are eligible to take out a new loan with better conditions because you might have a better credit condition now compared to when you were just first starting out or was a student. When you got your loan, you did not have a good credit history and therefore was considered a high risk by lenders. You were locked in with a loan with a high interest. Now that you have a job, you qualify for a favorable loan. Many comparison sites exist online to guide you in refinancing your loan.

Exceed Monthly Payments

For those who prefer to put a substantial part of their salaries into loan repayment, this is a strategy that will reduce monies owed significantly. As disposable incomes increase, set aside a fixed percentage of your wages to pay debts and loans that will lower the amount you borrowed at a faster rate. On top of automatic deductions, you can put money gained from windfalls such as tax rebates, salary increases, inheritance or lottery winnings towards your loan debt.

Debt Forgiveness

Debt forgiveness aims to cut you some slack but it does not mean that the amount you owe is written off completely. It might only provide short-term assistance to ease the pressures on borrowers. Debt forgiveness is a matter to consider once you are consolidating loans. You are not going to enjoy this break if you consolidate and refinance your loan. There are several ways to get your student loans written off or reduced. Joining the army, becoming a teacher or working for the public service will get your loans reduced provided you meet conditions. The Public Service Loan Forgiveness Program writes off the remaining balance on the loan provided that 120 qualified payments have been made.

Paying off student loans after higher education has been completed is a tough call especially if you do not have a high-paying job. However, with clever planning and strategy, you can get that loan fully paid by consolidating and refinancing, paying more than the amounts due religiously and even through debt forgiveness.