Top 5 Dos and Don’ts When Paying Off Student Loans

Almost 75% of Americans have student debt when they graduate college. That’s an astonishing number, isn’t it? The average graduate walks away with a whopping $36,000 in student loan debt. Chances are you want to get out of that debt as quickly as possible, but there are some things you should consider first.

The Do’s of Paying Off Student Loans

  • Know your Optionsdid you know you probably don’t have to pay back the full amount right away? You may have deferral options or payment arrangement options available. Don’t stress yourself out with a payment you can’t afford without exploring your options.
  • Do Ask for Income-Driven Repayment Plans – if you started your career making less money than you anticipated, ask for an income-driven repayment plan. While it may take you longer to repay the debt, a lower payment now can help you make your payments on time. As you make more money, you may be able to increase your payments and pay it off sooner.
  • Do Use Your Grace Period Wiselyyou’ll likely have some time after you graduate before you have to pay back your loans. Use that time to come up with a game plan with your servicer so that you know what is in store for you once your grace period ends.
  • Know Your Due Datesif you have multiple student loans, make sure you keep track of the due dates. Each loan may have a grace period, but it’s only a short amount of time. Keep careful track of the due dates to avoid penalties or ruining your credit.
  • Do Pay More than the Minimumif you can afford it, pay more than is necessary. You’ll cut your balance down faster and pay less in interest costs over the life of the loan.

The Don’ts of Paying Off Student Loans

  • Don’t Default on Your Loansif you can’t make your payments, get in touch with your servicer right away. One late payment can bring your credit score down drastically and make it harder to explore your repayment options.
  • Don’t Consolidate Your Federal Student LoansFederal student loans may have options for deferment or payment arrangements. If you consolidate or refinance them into a private student loan, you lose those options, which means making the full payments whether or not you can afford them.
  • Don’t Expect Loan Forgivenessthere are several loan forgiveness plans in place, but don’t assume you’ll qualify. Each program has specific requirements that you must meet yearly in order to qualify. Make your payments on time and if you end up qualifying for forgiveness, consider it a bonus.
  • Don’t Forget to Deduct Student Loan Interestyou may be eligible to deduct up to $2,500 in student loan interest on your taxes. Whether you qualify depends on the amount of interest you paid and your modified adjusted gross income.
  • Don’t Avoid Your Loan Servicerget to know your loan servicer. If you are in trouble, they are the first phone call you should make to see what options you have to avoid defaulting on your loans.

Getting out of student debt may sometimes look hard, if not impossible. But there’s a light at the end of the tunnel. Take one step at a time, figuring out your best plan of attack to get yourself out of student loan debt with the lowest amount of interest and fees paid.