5 Student Loan Payment Strategies to Try Now
October 7, 2013

With college costs continuing to rise (seemingly unchecked), it’s no surprise that average student loan debt has doubled over the past decade. Add to this unemployment concerns and you’ve got a recipe for personal financial disaster if you don’t play your cards right. And even if you have a decent job, if your debt is high and your income’s not high enough, you still may be struggling. We get that and want to help. Here are five student loan payment strategies to try now to deal with your debt:

#1 Explore Repayment Options

If you can’t afford the standard payment on your student loans, don’t just ignore it or pay a partial payment. Instead, apply for Income Based Repayment (IBR) or Pay As You Earn (PAYE) for a more affordable payment. If you have private loans or don’t qualify for one of these plans, applying for a deferment or forbearance is better than skipping payments because you can’t afford them.

#2 Sign Up for Auto Debit

Most lenders offer a small rate reduction if you enroll in their auto deduction program where they draft your bank each month for your payment. Depending on the size of your loans and years to pay it off, this option can save hundreds to thousands of dollars. This can also prevent you from paying late fees if you forget to make a payment or it gets lost in transit. An added bonus is that after 36 months of on-time payments, you’ll usually see a 1% interest rate reduction and another 1% reduced after 48 months of on-time payments (for many federal loans). Auto debit can help ensure you qualify for these significant savings.

Debt avalanche helps tackle high balances

Image source: ABCNews.com

#3 Devote Spare Cash to Fast Tracking Loans

No matter what payment plan you’re on, if you can pull together some extra cash, put it towards your highest interest rate loan. By paying off the highest rate loan first, you’ll save more on interest and then can devote the total you were paying on that loan toward the next highest interest rate loan. This is called the debt avalanche method and it’s a great way to ditch debt fast and as cheaply as possible.

#4 Create a Repayment Program

Some jobs come with student loan repayment benefits, but if you work in a sector where this isn’t the standard, consider appealing to your boss for annual bonuses aimed at your student loans or a one time student loan “signing bonus.” This can be especially helpful if a company has a set salary range they can offer for a position but has discretionary funds they can use to entice you to sign on to take a job. You also may be able to negotiate student loan reimbursement in lieu of other benefits that you wouldn’t otherwise utilize (such as unused sick days, family medical coverage if you’re single, etc).

Student loan repayment cycle

Image source: Ed.gov

#5 Calculate Consolidation Benefits

Consolidation isn’t automatically a good strategy, so you need to carefully evaluate what the effect of consolidation will be. Click here for a student loan consolidation calculator to see what the likely impact will be. Crunch the numbers and see if you’ll benefit from a consolidation. Another situation where you may want to consider consolidation is if you are behind on your loan payments. Consolidation is a one-time “get out of jail free” pass to rehab your loans if they are delinquent. Plus you may be able to use IBR or PAYE with your consolidated loans for an even bigger impact.

To check out other repayment plans and tips, visit our blog. For How To guides on consolidation, applying for IBR and a host of other topics, check out our student loan help center. And to get on top of your student loans, sign up for Tuition.io’s free student loan management tool to track and optimize your loans.