If you’re carrying student loan debt, you’re not alone. Among the college students graduating in the class of 2019, 69% took out student loans with an average debt of $29,000. While this figure can be daunting, a well-thought-out game plan can make paying off student loans more manageable.
Explore your options
The standard repayment schedule for federal student loans is 10 years. But that may not necessarily work for you if your starting salary is low or you’re having a hard time finding a job.
Be sure you evaluate your student loan repayment options. Federal student loans have a number of important features and protections that help make payments more manageable, such as income-based options that allow you to make payments that are a percentage of your income. You can also apply for deferment or forbearance, which lets eligible borrowers temporarily suspend payments. During forbearance, you will still be responsible for the interest that accrues. If you qualify for deferment, you may not need to pay interest.
Analyze your budget
Between rent, utilities, groceries and the occasional night out with friends, it can be hard to see where student loans fit into the picture. A budget can help you get a handle on it. To simplify the task, try the 50/30/20 budget rule method: No more than 50% of your income should go toward fixed expenses like rent, food and utilities; dedicate 20% of your income for savings and debt repayment; and spend 30% or less on discretionary expenses (i.e. “fun money”).
Don’t go it alone
Check to see if your employer has any programs to help with payment plans. While only 4% of employers currently offer student loan repayment assistance as a benefits perk, more plan to, and it never hurts to check!
To refinance or not?
You might be able to save on interest by refinancing your student loans. But before you do, make certain that you will not need to take advantage of the features and protections offered by federal loans such as deferment, forbearance and public service loan forgiveness. Once you refinance to private loans, in most cases, all of that flexibility goes away.