David Lerner Associates: Steps for Paying off Your Student Loans

Research indicates that the majority of those who have student loan debt are over 30 years old. This could indicate several different things: that students are staying in school longer, that some young people are going back to school later in their 20s or even their 30s due to the difficult job market, or that graduates are having a hard time repaying student loan debt. Or, it could be due to a combination of these and other factors.

Regardless of the reasons, it appears that many students and graduates could use some help in paying off their student loans. Here are four steps that may help you pay down your student loan debt:

1. Get a handle on your debt situation. The first step is to figure out exactly how much money you owe on how many (and what types of) student loans. This might sound obvious, but some students have borrowed money from multiple sources, each with different interest rates and repayment requirements, which can get confusing.

There are primarily two different types of student loans: federal (i.e., the government) and private (i.e., non-government lenders). If you’re not sure what type of loan(s) yours are, visit the National Student Loan Data Center, where you can enter your loan data and find out. Different student loans may have different interest rates — many financial experts recommend concentrating on paying off the highest rate loans first while making minimum payments on the others.

2. Look for assistance from student loan programs. Several different programs are available that may be able to help you mange your student loan debt. For example, the Income Based Repayment program may cap your federal student loan payments at 15 percent of your total income. This will not help you pay down your debt faster, however, and it may eventually result in more money paid in interest over the long term. But it can help ease your monthly cash flow situation if it’s tight.

In addition, the Public Service Loan Forgiveness program will forgive remaining loan balances on government loans for individuals who work in qualifying jobs (including teachers, civil servants, public safety offers and others) who have made monthly payments for at least 10 years.

3. Tighten your budget. Rather than stretching out your loan repayment period further, it may be a better option to look for ways to put more money toward paying down your debt and getting it paid off faster. This will reduce your financial burden and save interest payments over the long term.

Take a hard look at your monthly budget to see if there are areas where you can trim expenses and apply the savings to your student loan debt. Maybe this means eating out and going to the movies less often, downgrading your cable TV or cell phone service, or planning a “staycation” instead of an expensive travel vacation. The short-term pain will be offset by the long-term financial savings, not to mention the personal satisfaction of paying off your student loans.

4. Stay motivated. Finally, it’s important to keep your enthusiasm and motivation high as you work toward paying off your student loans. This is likely a long-term goal, requiring many months or years of financial discipline, so try not to let yourself get discouraged. Set interim goals and milestones for paying the debt down to certain levels, and allow yourself a little celebration when you reach them.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC