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8 Ways to Pay Student Loan Debt

You can never have too many ways to pay off your student loan debt! My husband and I both paid our student loans off within four years of graduation – you can, too.

These tips are from Freedom Debt Relief — and they’re tips I wish I knew back when I was burdened with student loans.

Before the tips, a quip:

“A billion here, a billion there, pretty soon it adds up to real money.” ~ Senator Everett Dirksen.

The secret for achieving your financial goals is realizing that every quarter counts! Too many people drop $5 for a Starbucks frappucino without thinking twice. Every dollar – every quarter – eventually adds up to “real money” — but you have to keep your eye on the ball.

To learn more about paying off student loan debt, read How to Wipe Out Your Student Loans and Be Debt Free Fast: Everything You Need to Know Explained Simply.

And, here are some tips for paying off your college loans…even if you owe $150,000….

8 Ways to Pay Student Loan Debt

1. Pay your household and credit card bills on time. Paying your bills on time is the best way to build a strong credit rating (which you need to get a mortgage or other loan). “The track record college graduates establish in the first years of working and paying bills will help build a stronger financial future,” says Kevin Gallegos, vice president of Freedom Debt Relief. “Setting up a system to support good record-keeping and paying bills on time is extremely important.”

2. Look into income-based loan repayment options. College students who struggle with student loan debt have some options for relief. For instance, if their loans were issued by the federal government program, there is an income-based repayment plan that caps the amount graduates must pay on student loans at 15 percent of discretionary income. After 25 years, any remaining balance is forgiven.

3. Get a public service job? I have degrees in Psychology and Education – neither of which lead to jobs that pay big salaries! But, if I still had student loan debt, I might get a financial break. Gallegos says if you work in public service, your student loan balance can be forgiven after 10 years. New laws make the program even more generous in the future: For loans issued after 2014, the repayment cap will be 10 percent of discretionary income, and the loan program will forgive outstanding balances after 20 years. To benefit from this loan program, you must provide paperwork that prove you’ve worked in public service for 10 years.

3. Pay your credit card debt first. One of the best ways to pay student loan debt and achieve your financial goals is to put away your cards. Stop racking up more debt! Use cash or a debit card and stick to your household budget. If you’re a college graduate with credit card debt, your smartest financial move is to pay off your credit cards first (because credit cards carry extremely high interest rates (typically 15 percent to 30 percent).

4. Pay other loan obligations next (before your student loan debt). After your credit card debt, pay your other debts (such as personal loans, car payments, etc) as quickly as possible. “If you must pay interest, you are better off paying it on student loans, where you can receive a tax deduction, rather than on consumer loans, which offer no tax benefit,” says Gallegos. If you have trouble saving money, learn how to make good financial habits stick.

5. Take advantage of the tax benefits. Most new graduates can deduct up to $2,500 per year in student loan interest payments. New college graduates might also qualify for additional education credits based on the amounts paid for education during this tax year. A tax advisor can help you get all the education-related deductions and credits for which you qualify – and so can a skookum tax program like QuickBooks.

6. Save money for a rainy day (your emergency fund!). Unexpected expenses always come up, and you need to be prepared financially. “Everyone needs an emergency fund of at least $500 to start with, building to enough to cover basic living expenses for at least six months,” says Gallegos. Did you get a cash gift because you recently graduated? Don’t spend it on cool techo gadgets! Instead, put it towards paying off your student loans. You can buy all the cool stuff you want later, when you’re flush..

7. Learn the options that exist for college students who can’t pay their loans. Contact your lender immediately if you can’t pay your loan. Many student loans can be deferred for a time, although interest will continue to accrue. Don’t stop paying your loan; this is called “default,” and damage from defaulting can prevent borrowers from buying a home or car or getting a job, apartment or insurance for years to come.

8. Begin saving for retirement. I know this sounds nuts, to start saving for retirement when you’re barely out of college! But, your early working years are the prime time to start thinking about achieving your long-term financial goals. Investments made early have many years to grow – like compound interest. If you can contribute to a 401K or RRSP plan, do it!

How about paying off your student loan debt by visualizing it? Read Money and the Law of Attraction – 4 Ways to Attract Wealth.

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5 thoughts on “8 Ways to Pay Student Loan Debt”

  1. Money can’t buy happiness, but it sure makes misery easier to live with. I had a huge student loan debt and now that it’s paid off, I am not much happier but life feels lighter. The sooner you pay off your student loan debt the happier you’ll be.

  2. Laurie Pawlik-Kienlen

    Thanks for your comment, Nico. I just read a study today that says that student loan debt can increase self-esteem and empowerment. Very interesting.

  3. Thanks for the tips! Nowadays student loan debt is a real burden that cannot be just be avoided or paid off simply by filing bankruptcy.

  4. Laurie Pawlik-Kienlen

    Thanks for your tip, Jeff! Perhaps before students sign a loan promissory note, they should get someone they trust to look it over. A financial advisor would be great, but even just a wise, financially experienced person would do the trick.

  5. Students should make sure to understand the details of their loans before signing their promissory note, particularly how the different repayment types can affect how much they will owe in interest over the life of the loan. Always comparison shop for rates and terms before taking out any student loans!