How to Pay off Student Debt without Going Crazy

StressedAs we enter into 2016, student debt has become a hot issue both in the media, and on Capitol Hill. In March of 2015, President Obama signed the “Student Aid Bill of Rights”, which states:

  1. Every student deserves access to a quality, affordable education at a college that’s cutting costs and increasing learning.
  2. Every student should be able to access the resources needed to pay for college.
  3. Every borrower has the right to an affordable repayment plan.
  4. And every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans.

(language taken from whitehouse.gov)

At a press conference in Georgia on Tuesday March 10, 2015, regarding Obama Student Loan Borrowers, “We’re trying to make sure that across the board, more and more young people can afford to go to college, and then afterward, aren’t so burdened with debt that you can’t do anything else.”

Two days later, Congress introduced the “Fairness for Struggling Students Act of 2015”, a bill largely touted by democrats. The likelihood of such a bill being passed is very, very low, but at least we now know that the government is responding to outcries over seemingly never-ending student debt.

According to the website, projectonstudentdebt.org, the average American student graduates from college with $29,400 owed in student loans. This number is even higher for students who attended private and private for-profit universities. This number also assumes that the “average” student graduate from college in four years, did not switch majors, or pursue a specialization or higher-level degree.

The federal government grants around 90% of these loans, with the remaining 10% made by private lenders such as banks and credit unions. Many students see private loans as a last resort – as necessary only when they have maxed out their federal loans. Private companies generally charge much higher interest rates and fees, making the debt owed much more difficult to pay down (fortune.com/obamastudentloans).

According to the Consumer Financial Protection Bureau, in 2012, around 850,000 private student loans (totaling more than $8 billion owed) were in default.

So, you’ve graduated from college, degree in hand, and if you’re lucky, a job lined up. You’re overjoyed at the thought of no more all-nighters spent eating ramen noodles – until you get your first student loan bill. The reality is that living like a college student isn’t just for students – it’s become necessary for those of us who graduated with student loans. Looks like ramen is back on the table.

So, how can one in this situation manage to pay these loans without losing their sanity? I’ve hinted at the first step in the paragraph above. You need to continue living like a college student.

No, this doesn’t mean bring on the keg stands and all-night parties; this means that now is not the time to buy a car or brand-new furniture. Essentially, try to live simply. Find a cheap place to live, get a roommate or two, avoid going out to eat too much, etc.

We all know what we should do, but trust me, if you actually manage to do most of these things, you’ll be sitting pretty in 5 years while your friends are still drinking PBR and Keystone.

You also need to understand the ins and outs of the loans you have. This means you will have to call or email all the banks and/or credit unions with whom you took out loans. This can seem daunting, but getting a grip on your financial situation will make things easier in the long run.

Set aside a few hours a day and just hit the phones. Make a document with your information in it, including the lender’s name, your username, the amount owed, the payments you’ll be making, etc.

Going through five different websites to pay loans every month can be overwhelming, so it helps to have all of this information in one place. Another option is for you to arrange an “auto pay” with your own financial institution that will automatically send your payment every month. Be careful with this last option, though, because if you have insufficient funds, your bank will hit you hard with overdraft fees.

Student debt consolidation is another option for those who have above average credit scores and a large amount of debt from multiple financial institutions. Some shy away from this route because of the confusing process, and the income and minimum credit score requirements. But consolidation is a pragmatic choice for those students struggling to pay off multiple private student debts.

Essentially, consolidation takes all of your private student loans and makes them into one huge loan. A consolidation company effectively buys out each of your private student loans, takes on your debt, and charges you a lower APR to pay off a single loan that is now in their name.

Generally, a consolidated loan will allow you to pay less money per month over a greater amount of time. Again, in order to consolidate your student debt, you will have to meet certain credit requirements – but keep in mind that most of these companies offering consolidation will allow a co-signor.

To wrap up – hopefully, after reading this article, you’re feeling a bit more comfortable with this whole student debt thing. To sum up, these are the ways to avoid the post-college crazies:

One – continue to live on a budget. Your fancy (or not-so-fancy) new paycheck may seem like a lot compared to what you’re used to, but keep in mind that now is not the time for living the high life. Two – get a handle on what you owe and to whom. Make a list of your loan providers and your monthly payments. Three – consider consolidating your debt. This last option can save you thousands of dollars.

Do your research and don’t be afraid to ask your parents to cosign. Even if you only manage to do one of two of these things, I can promise you, you will be better of than most!

photo by: