With the price of college increasing, it seems unavoidable that students will have to borrow money to complete their education. Federal student loan repayment is something millions of graduates are dreading. So how to get rid of student loan debt while still living your life?
It’s not as difficult as you might think. Just follow these steps to set up your student loan repayment! I've covered both federal and private repayment options below.
How to Get Rid of Federal Student Loans
First, debt repayment depends (largely) on the kind of student loans you have: federal vs. private.
Step #1 – Choose Your Repayment Plan
The first step in starting your federal student loan repayment is to actually choose your payment plan. Here's how to do that and start getting rid of student loan debt:
- If you haven’t spoken to your loan servicer about what plan is best for you (more on that later!) or didn’t choose a repayment plan already, you were probably opted-in to the Standard Repayment Plan.
- Take a look at Federal Student Aid’s overview of repayment plans to get an idea of what options are available to you.
- But what if your repayment needs change? One of the great things about federal student aid is that you can actually change your repayment plan whenever you need.
This can help ensure that you are able to make your payments while giving you control over how and when you pay.
Step #2 – Find Your Loan Servicer
The next step in repaying your student loans is to find your loan servicer. You won’t be writing a check to the government each month, you’ll actually be working with a financial institution who handles your loan. You can find your loan servicer through logging in to the FSA website – it’s that easy!
Why do you need to know your loan servicer? Since your loan servicer oversees your repayment, they are who you will contact if you need any assistance with your loans. This includes changing your repayment date or setting up automatic debits so that you never miss a payment. Plus it's best to actually know these things instead of it being some nebulous question in the back of your mind (getting answers to queries like that is #adulting folks.)
Step #3 – Know the numbers on your total debt balance
This sounds silly, but it is really important. If you don't know the answers to these questions, you're doing something wrong:
- Do you know all the different types of debt you're responsible for?
- Do you know your current debt balance?
- What about the interest rate?
Knowing simple answers like these will help you to understand what you will really pay in interest over the course of debt repayment. Use a debt repayment calculator like this one from Credit Karma to help you see the big picture of your debt. You can also use this tool to set goals for yourself, such as seeing what minimum monthly payment you should make to pay off your debt by a certain date.
Step #4 – Start tracking your payments
The next step is to actually make your monthly payments. You should take an active role in your repayment schedule – set up a reminder on your phone, mark your payment date on a calendar, or set up automatic debits so that you don’t miss a payment.
Other Federal Student Loan Repayment Resources (by our editor, Lauren, for Student Loan Hero)
- American Education Services [AES] Information and Resources for Borrowers
- 3 Reasons Student Loan Debt Forgiveness Isn't a Magic Bullet for Debt
- Are you Eligible for a Pell Grant?
- What You Need to Know About that “Master Promissory Note” You Signed
How to Get Rid of Private Student Loans
There are really only two strategies for getting rid of private loans:
- Getting aggressive with a debt repayment plan, a la my $8k in 90 Day Challenge.
- Refinancing (vs. debt management or debt consolidation) is often the best, easiest option.
When is refinancing student loans a good idea?
Say you have $40,000 in student loans at 9.9% interest and ten years left on your repayment. By refinancing to a 7% interest rate, you lower your monthly payment by $100 and save over $13,000 in interest over the next ten years.
$13,000! Yes, that is a downpayment on a house.
What is the best option for refinancing private student loans?
Earnest Why? Because very few platforms allow you to apply for refinancing such ease. Here's a handful of other reasons why I love this option:
- Borrow $1,000 to $75,000 at fixed rates from 5.99%
- Refinance rates that consider education, work history, and earning potential to supplement your credit profile
- Get your rate in 2 minutes without affecting your credit score!
- No prepayment penalties or hidden fees (this is huge, you should be able to pay off your debt WHEN YOU WANT, WHENEVER YOU WANT! Insist on it!)
Other Private Student Loan Repayment Resources (by our editor, Lauren, for Student Loan Hero)
- Follow these ultra-easy, frugal tips for one year to pay off student loans faster
- Do I have to pay my private student loans while I'm still in school?
- Where to go for personal help with your student loans
Should I get rid of student loan debt first, or save up to buy a home?
Traditionally, it's important to pay down debt first before you buy a home. Paying down debt has big home-buying benefits: it raises your credit score and frees up money in the budget for a mortgage payment and upkeep.
But with student loan debt delaying homeownership up to seven years, it's become the age-old millennial conundrum: do I pay off student loans or buy a house? Do I have to wait for one to achieve the other?
You can get creative, but I do think it's worth knocking out a substantial portion of your debt before buying a home. Why? Because you'll be able to afford more and breathing room is always a good thing.
How can I get rid of student loan debt fast?
- First, save up a $1,000 cushion to cover yourself in case of emergencies.
- Then put every extra penny toward your student loan repayment.
- Set small, manageable financial goals.
- Create a strong debt payoff plan.
- Hack your budget (See here for four creative ways to hack your budget.)
Creative ways to pay off student loans
Petsitting with Rover
This is a creative way to pay off debt because it's one of the easiest side hustles out there to get started. Only thing required is a clean background check and a love of animals.
Try a Gig Job on an App
Pets not your thing? There are SO MANY ways to earn money via gigs you can book via your smartphone. (Here's a list of all of our favorite money-making apps we could find.)
- Rideshare driver with Uber or Lyft
- Delivering groceries with Instacart
- Delivering dinner after work with Postmates or DoorDash
- Becoming a “Tasker” for Taskrabbit and doing small side gigs on the weekends
Save the change from your purchases
You may not know it, but rounding up every dollar that you spend could yield big results for your bottom line. Apps like Qapital have been helping people save the change, or save when they splurge for years, but a new app called Qoins specifically helps people struggling with debt to save up “spare change” for extra payments.
When it comes to student loan debt, pay it off early and pay it off as fast as you can so you knock it out and get on with your life.
Still considering student loan refinancing? For those with thin credit profiles, I like to recommend Earnest, as this company factors in work history and school record to give you the best interest rate possible when refinancing. Click here to learn more and to check your rate with Earnest in under two minutes.