Did you know that nearly half of Americans who attend college will have some form of student debt? According to the most recent Survey of Household Economics and Decision-Making (SHED), not only do 42% of Americans who went to college have student debt, but 11% are behind on their payments. If you’re one of the many Americans dealing with student loan debt, don’t feel discouraged because there’s a solution to help you manage your debt.
Here are a few steps to take to get you on the path toward student debt freedom.
UNDERSTAND YOUR LOANS
The first step to tackling your student debt is to understand what you owe and the type of loans you have. It's easy to make payments and not give your loans a second thought. However, if you want to make a dent in your debt, you need to understand the ins and outs of each of your loans. Take the following steps to help you fully understand your student loans.
Identify Your Loans. It’s very common to be unaware of your student loans or the total debt amount you owe. While it’s beneficial to keep track of your loans during college, many students fail to do so. That's why it's essential to track them down now. You can start by checking the National Student Loan Data System for federal loans. For private loans, you can contact your lenders directly or request a copy of your free credit report.
Review Your Payment Options. If you have federal loans and are unable to afford your monthly payments, you may want to consider an income-driven repayment plan. This option allows you to repay your loans based on your earnings. You could also apply for deferment if you’re currently out of work. This repayment option may provide temporary relief while you get back on track.
Choose a Repayment Option. In addition to the option above, you may want to consider student loan consolidation if you struggle to manage multiple loans at once. You could also explore student loan refinancing if your credit is in good shape, and you don't qualify for a student loan forgiveness plan.
CREATE A BUDGET
Once you understand what you owe and what your monthly payments are, it’s time to get serious about a budget. Creating and sticking to a budget can help you trim unnecessary expenses and put additional money toward your debt. So, take some time to write down all of your expenses and income. Then you can decide areas where you can cut back in order to pay down your debt quickly.
INCREASE YOUR INCOME
While you may think this is easier said than done, increasing your income is a great way to make a dent in your student debt. Here are a few ways you could make more money this year:
- Start a side hustle or business based on your interests and talents.
- Ask for a raise if you’re employed.
- If you’re not employed and job seeking, try to negotiate a more substantial salary when accepting an offer.
- If it’s available, ask for more shifts or overtime.
- Sell unwanted items online or at a second-hand store.
- Get a part-time job.
CLAIM YOUR STUDENT LOAN INTEREST
The IRS lets you deduct up to $2,500 or the amount of interest you paid on your qualifying student loans. This means that when you file your taxes, you can make up to $2,500 less. Your lenders should send you this information so you can submit it with your taxes.
THE BOTTOM LINE
Repaying your student loans doesn’t have to be a daunting task. Simply understanding what you owe, selecting a repayment plan, sticking to your budget, and prioritizing your debt will help you achieve debt freedom in no time.