Eight Tips to Help Manage the Cost of Student Loans

College years can be exciting, whether you are just starting your undergraduate degree or have decided to explore your passions with a post-graduate program. It’s easy to get caught up in dreams of boundless potential and forget that at some point, you will have to pay off your education debt. If you’re lucky, grants, scholarships, or family will fully fund your degree. If not, you’re going to need a plan.

Managing student debt can present financial challenges as graduates enter the workforce and begin their independent lives. There are some actions that can help reduce student loan debt or manage it in a way that doesn’t create a financial burden.

There are different types of student loans out there, but in general, student loan debt can be deferred until six to nine months after you have graduated. Subsidized federal loans do not accrue interest while they are in deferment while other loans often begin accruing interest immediately, increasing the overall cost of your education with every accrual.

Prevention is always the best medicine, so if you haven’t set off for your educational adventure quite yet, I advise you to take advantage of all the grants and scholarships you can get your hands on. Another option is to save as much money as possible and accept gifts or loans from family members or friends to help reduce your interest-accruing loan amount.

Whether you are in the planning stages of your college education or have already started your degree, the following tips may help manage the cost of higher education:

1. Explore repayment options based on your financial situation and goals
   There are standard, graduated, and income-driven repayment plans. Standard plans have one fixed payment amount each month for the life of the loan, which makes it easy to plan for your budget. For graduated loan repayment plans, you start paying a lower monthly amount that increases over time. This type of repayment plan may help with monthly budgeting now, but you will pay more in interest over the long run. Income-driven repayments plans, sometimes referred to as IDR plans, set your payments based on your income levels. Evaluate all your loan repayment options carefully to pick which fits your needs best, short- and long-term.
2. Begin making payments early
   If you are able, start paying down your debt during the deferment period. You can do this by taking on small jobs during the school year and working full time over summer breaks. If you have a subsidized loan, this tactic will help you pay down some of your debt before it even has a chance to accrue interest. Regardless of your loan type, making payments during the deferment period will reduce your overall debt, which will mitigate interest charges.
3. Loan forgiveness options
   There are different ways your student loans can be forgiven. For example, if you are thinking about a career in public service, such as a teacher, nurse, or working for qualifying non-profits, some or all of your loans may be forgiven. Make sure you’re working with your student loan servicer to take advantage of any loan forgiveness opportunities.
4. Roth IRA
   If you’re thinking about going back to school and it’s been a while since you’ve sharpened your pencil, don’t overlook your Roth IRA as a tool to help fund your college tuition and avoid additional loans. If you’ve held your Roth IRA for five years or more, the federal government allows qualified penalty-free withdrawals for college expenses for you as the account holder, or for the account holder’s spouse, children, and grandchildren (and great-grandchildren, too). It’s a good idea to speak with a financial advisor to make sure you’re not affecting your future financial plans with early withdrawals.
5. Consider paying off higher-rate interest loans first
   If you have a mix of loans, including variable-rate private loans, take the time to research what the interest rates are on all of your loans. This way you will know what loans have the highest interest rates, and whenever you have any extra funds, those are the ones to target and pay off first. That will reduce your total interest payments. That said, there are different approaches to paying down debt, and you can choose the one that works best for you.
6. Spend conscientiously and look for opportunities to save
   When you have debt to pay down, you want to make sure you know where you’re spending your money and incorporating debt payoff into your normal budget. While you’re paying down your debt, think carefully about your spending. A good rule of thumb? If you don’t need it—whether it’s a little thing or a big thing—don’t buy it. The most important thing is to have a conscious spending plan and a budget that includes your debt repayments each month.
7. Look for bonus cash to put towards your loan
   Hmmm, what other resources could you divert to your loan? Could you sell things you no longer need or use online and put the money into your loan? Could your birthday check or your tax rebate help pay down your debt and save you money in the long run? Look for ways you can divert extra cash into paying down your loan now. Some employers also offer student loan repayment options that could be taken advantage of.However, it is recommended to not put all of your savings towards student loan debt. Instead, focus on a balance between paying off debt and saving.
8. Consider consolidating or refinancing
   Once you’ve graduated, reassess your school loans. Are you paying too many individual loans and need to consolidate? Are you getting the best rates on all of your loans? Talk to your credit union or other financial institution to find out if consolidation or refinancing will help reduce your payments and/or loan interest rates. Be sure to consider all the factors when it comes to federal student loans, including potential deferments, tax benefits, and those aforementioned loan forgiveness opportunities.

Your situation will be unique. Choose the tips that make sense for you and remember that a little sacrifice now can result in large savings in the long run.