3 Tips to Manage Student Loans | ImmediatePay

Stay on top of your student loan payments while still having money left over for other expenses with these three tips in mind!

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1. Understand what’s going on

When it comes to managing student loan debt, the most important thing is to understand your loans. Knowing the difference between federal loans and private loans is essential. 

Federal loans usually come with lower interest rates. Private loans tend to offer more flexibility in terms of repayment options, but you’ll need a higher credit score or cosigner to qualify for them. It’s also important to stay up-to-date on consolidation options and other forms of assistance offered by the government or through private lenders.

Having a full understanding of the type of loan you have can help guide your decisions when it comes time to repay it. Knowing which repayment plan is best suited for your needs will take some research – but it’s worth taking the time to look into these options thoroughly before making any final decisions. Additionally, if you find that one loan carries especially high-interest rates or other unfavorable terms, consolidation may be an option worth looking into as well.

It’s critical that borrowers understand their student loan situation inside and out before deciding how best to proceed with repayment! By doing so, they can make sure their debt is manageable and avoid any unpleasant surprises down the road when the bill comes due. To track this, you will need to start by making a list of all your student loans. This list should include the lender, loan balance, interest rate, and minimum monthly payment.

2. Create a budget

Creating a budget is essential when it comes to managing your student loans. Not only will it help you determine how much money you can afford to spend on loan payments each month, but it will also help you save money and avoid taking on additional debt. Here are tips for creating an effective budget:

  1. Step 1: Make a list of all your sources of income. Any salary, wages, gifts, or investments should be included here.
  2. Step 2: Create a list of all your expenses. Both fixed and variable – including utilities, rent/mortgage payments, car payments, insurance premiums, and monthly loan repayments.
  3. Step 3: Calculate the difference between your income and expenses. If there is a positive difference then you have disposable income that could go towards loan repayments; if the difference is negative then look for ways to reduce spending or increase income from other sources (e.g., part-time job).
  4. Step 4: Set up an emergency fund. Having savings readily available will help alleviate financial stress in case of unforeseen circumstances such as illness or job loss.
  5. Step 5: Monitor your credit score. Checking your credit score periodically can alert you to fraudulent activity or incorrect reporting which might be affecting your ability to obtain lower interest rates on loans.

3. Create a debt snowball

Putting together your list of student loans along with your budget will help you create a debt snowball that can help you pay off your student loans in a systematic and efficient manner. Remember, it’s important to continue making the minimum payment on all of your loans (even the ones you’re not focusing on) to avoid late fees and negative impacts on your credit score. Here are the steps to create a debt snowball for student loans:

  1. Step 1: Determine the order of repayment. Decide on the order in which you want to pay off your loans. One option is to start with the loan with the lowest balance, regardless of the interest rate. Another option is to start with the loan with the highest interest rate, regardless of the balance. The first option is often recommended for those who need motivation from seeing progress, while the second option can save you more money in the long run.
  2. Step 2: Determine extra payments. From the budget exercise you went through, determine how much extra money you can put toward your debt snowball each month. This extra payment will go towards the loan you’re focusing on paying off first.
  3. Step 3: Make extra payments. Each month, make the minimum payment on all of your loans and the extra payment on the loan you’re focusing on paying off first. Once you’ve paid off that loan, take the total amount you were paying towards that loan (minimum payment plus extra payment) and apply it to the next loan on your list.
  4. Step 4: Repeat. Keep repeating the above step until all of your loans are paid off.

Remember, you are not alone!

It’s okay to ask for help! The idea of student loans overall is an overwhelming topic for new graduates. No one really has it all together, even though it appears people may have made substantial progress in paying off their loans. It’s hard asking for help when you feel like you are “already too far gone.” If you are struggling to manage your student loan payments, know that there is help available. Most lenders offer a variety of options and assistance programs to help borrowers make their payments.

If you are a recent college graduate or employ young professionals, learn more about our free-to-employer financial wellness benefit by booking a discovery call here.

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