How to help manage student debt efficiently

Student debt has become a reality for 1 in 3 US citizens between the ages of 18 and 29, amounting to a nationwide debt of $1.5 trillion.¹ The average student loan debt for recent college graduates is nearly $30,000.²

A college education should feel like a smart investment in your future, but that isn’t always the reality. Student debt can take a toll not only on your wallet, but also on your mindset and goals. For example, Fortune reports Celina Chanthanouvong, a 25-year-old with $25,000 of student debt, plans to forego her dream of having children “not because [she] doesn’t want them, but because it would be financially irresponsible.”³

The good news is you do have the power to act and change your situation. Let’s dig into how to help pay off your loans faster.

Check out loan forgiveness programs

Did you know 47 states currently offer loan forgiveness programs?⁴ They vary by state but are worth looking into. For example, in Alabama, math and science teachers can receive up to $7,500 of forgiveness per year, for up to four years, to repay federal student loans.⁵ Additionally, you may qualify for Public Service Loan Forgiveness if you work for the government or a non-profit organization.⁶

Under the PAYE (Pay As You Earn) income-driven replay plan, payments on eligible federal loans can be capped at a percentage of your income if you have a partial financial hardship, which is defined as monthly repayment amounts above the level calculated under a 10-year standard repayment plan.⁷ If you make those payments and meet other requirements, any remaining balance may be forgiven after 20 years of qualifying repayment.⁸

Out of sight, out of mind

See if your employer can channel part of your paycheck into a “loan payback” account. The money is out of reach until you’re ready to pay off a chunk of your debt. Or, set up an automatic transfer of funds each month to start paying back the loans as soon as you can.

Use surplus cash to make payments

If you get a raise or a tax refund, think about using it as an opportunity to pay down your debt faster. You could also use the surplus to pre-pay the principal on your loan, which helps lower the lifetime interest costs.

Consolidate your loan

Loan consolidation can be helpful in not only simplifying multiple payments into one but also saving you money. Consolidating federal loans doesn’t reduce your interest rate, but consolidating private loans may allow you to do so. If you have private loans, it’s worth checking periodically to see if you can get a lower interest rate by refinancing.

Protect your repayments

Many people protect their income with disability insurance, which helps replace income lost if you’re too sick or injured to work. But if you’ve taken out loans to finance your education, you don’t just need to protect your income. You also need to protect your ability to repay your debt. Look for an insurance carrier that offers the option to add student loan protection coverage in the event of a disability.

Take care of your finances, take care of your well-being

Finances are more than just numbers — they impact how you live, how you feel, and what you can do. Our research shows that working Americans who are confident, financially and emotionally, prioritize living within their means, sticking with a plan, and deferring gratification.⁹ It’s a great idea for those who want to pull themselves out of student debt, as well.

Learning how to take control of your student debt can help you create a happier and more satisfying future. And remember, student debt may be overwhelming, but it’s also not meant to be paid off overnight. That’s why the loans have terms of anywhere from five to 25 years. But you can speed up the process by taking a proactive approach.