With education becoming more expensive, student loan debt among millions of Americans is piling up. Listed below are five steps to take if you are considering how to manage the burden.
Understand current policies – Following the Coronavirus pandemic, the CARES Act was passed in March and set out specific benefits for student loan debt. It provides automatic suspension of principal and interest payments on federal student loans, with the original expiry date extended from September 30, now set for December 31, 2020. From March 13 through Dec 31, the interest rate is set to 0%, and no payments are required. However, making payments during this period will allow you to pay off your loans faster because your entire payment is applied directly to the principal.
Know your situation- When you understand repayment options such as standard plans, extended plans, income-based plans and other payment options, you regain control. If you are confused with the changing regulations, expert guidance is crucial. To pick the best payment plan for your specific situation, it is helpful to have someone review and lead you through repayment options.
Pay the maximum– Most people tend to use a specific percentage of their monthly income towards paying off student loans. However, if you have the ability to pay more, do it. Not only will it help pay off your loans faster, but you will be taking bigger steps toward financial freedom. Look at your typical monthly expenses and decide whether some are necessary. If not, cut them out, at least until your loans are paid off.
Be intentional – Student loan debt can become a huge part of your life. If you approach repayment passively, only doing the least that is required, the burden can prevent you from moving your life forward in myriad ways. Interest is very powerful and compounds silently and effortlessly. The more intentional your plan, the faster you pay off your loan and the less interest you will end up paying to your lender. Set a budget and stick to it. Being aware of your financial situation and the severity of your student loan debt will open your eyes and prevent unnecessary spending.
Don’t rely on continued forgiveness – Don’t get comfortable with paused payments with a 0% interest rate. Although many people are pushing for an extension in student loan benefits, expecting this outcome can be detrimental. By stopping, you are only prolonging the amount of years being trapped in debt. Instead, stick to your plan and make payments as you normally would.