The Consumer Financial Protection Bureau reports that U.S. student loan debt exceeds $1 trillion, and student loan debt among seniors 65 years and older has climbed 600 percent in the past decade. If you’re stressed about paying off or managing a mountain of student loan debt, the Pennsylvania Institute of Certified Public Accountants recommends these five strategies to help you climb out of the red.
1. Start now
Student loan debt is not going away, and the longer you put it off, the more interest you’ll pay. The best option is to start making payments as soon as you graduate. Set your monthly payments as high as you can afford to pay so you become debt-free as soon as possible.
2. Lower your payments
If you can’t afford your monthly payments, try reducing them. See if you can increase the amount of time you have to pay the loan. Extending the term means you’ll pay more interest over time, but reducing your monthly expenses may be your top priority now. You can always increase your monthly payments once you land a big raise or promotion.
3. Consolidate your bills
Many students receive several loans to help finance their education, which means they pay a number of different lenders each month. To make life easier, consider consolidating loans so you make just one payment each month. When you consolidate, you take out a new loan that’s equivalent to your total debt, and you use it to pay your existing balances. If you decide to pursue this option, make sure your loan terms won’t end up costing you more money.
4. Pay more than the minimum
The longer your loan term, the more interest is applied. While it might not be possible to pay more than the minimum due every month, try to put any extra money you earn (from a bonus, raise, etc.) to your student loans. You’ll pay less in the long run, and you’ll be out of debt faster than if you paid the minimum.
5. Budget
You’ll never get out of the red if you continue to build debt after you graduate. Set a strict cash budget, so you know where your money is going each month. Hold off on big purchases, such as a new car or vacation, until you’ve paid down your debt. Remember that debt is stress, and life is easier when you don’t have it.
Consult Your CPA
Whether you’re looking to reduce your regular payments or manage your student loan debt, a CPA can help you accomplish your goals. For more debt reduction tips or to find a CPA in your area, visit www.picpa.org/moneyandlife.
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