Ultimate guide to managing your student loan debt

Managing your student loan debt

Taking out loans for school can be a smart way to invest in yourself, but it’s normal to feel overwhelmed by debt. And that stress isn’t limited to student loans. Many of us are juggling so many payments like the following:

• Mortgages
• Credit card balances
• Car loans
• Personal loans
• Home equity loans

All of this can add up and feel like a lot to handle. But being strategic and addressing debt one step at a time can make a big difference.

Organizing your student loans and other debt

It can be stressful to have loans with different due dates, amounts, and requirements. To make the process easier, start with a list of your outstanding student loans and other debt. This can be as simple as drawing a table in a notebook, creating a spreadsheet, or using a budgeting tool.

In your spreadsheet, create fields for the following:

• The name of the debt (student loan #1, credit cards #1-4)
• Interest rate and type (fixed or variable)
• When payments are due
• Account number
• Minimum payment
• Your balance
• Any possible tax benefits

Need help getting started? Here are three resources to help you get organized.

1. Download a monthly budget worksheet to make sure you’ve captured all your outstanding debts.
2. Get a free copy of your credit report. You can request a free copy every 12 months by going to AnnualCreditReport.com or calling 877-322-8228.
3. Check your FICO® Score to understand your credit health, identify areas for improvement, and look out for better interest rates. 

Set up a budget 

Once you’ve written down all your debts, it’s easier to see how they fit with your income and monthly expenses like rent or mortgage. Creating a budget will show you where your money is going and how much is coming in. From there, you can figure out how much you have left to put toward extra debt payments or to add to your savings.

Pro tip: Set up automatic transfers from your paycheck to your savings account. If you never see the money, it might make it easier to save and manage debt payoffs. 

Prioritizing your debt payoffs

How you manage debt is ultimately a personal decision, with no one-size-fits-all approach. You have to figure out what works best for you. 

Once you set a budget and know how much extra money you can put towards your debt, there are different ways to pay it off. Here are a few repayment methods to consider.

Debt snowball method

Start by paying off your smallest debt first, then the next smallest, and so on. With each account you pay off, the more accomplished you may feel. This could offer quicker wins and might help keep you motivated to stay on track.

Debt avalanche method

Focus on clearing debt with the highest interest rate, then move on to the next highest. This approach could help you save money in the long run, as it can potentially reduce the amount of interest you pay overall.

Debt consolidation 

Combine all your debts into one loan with a lower interest rate. This approach might make it easier to manage your payments by consolidating them into a single monthly payment. It could also lower your monthly payments.

Your own system

Create a plan that works best for you. Mix and match different methods or come up with your own strategy to pay off your debt.

Pay down your debts faster 

We all want to pay off debt as quickly as possible, and paying more than the minimum balance on your debt can help. Not only could it save you money, but it can potentially reduce the amount of interest you pay overtime.

You can also contact your lenders and ask them to apply your extra payments to the principal balance, which is the amount you borrowed and need to pay back, instead of the interest. This can help you pay off debt faster and lower the overall interest you’ll pay.

Consider a financial professional 

If you need extra help handling your finances, you have options. There are financial professionals who can offer expert advice, help you create a plan, and ease some of the stress. There are also online services and apps that can help with budgeting and debt management. Don’t be afraid to ask for help and take advantage of resources out there that can make managing your finances a lot easier.