7 Ways to Crush Your Student Debt
These simple steps could lead to a debt-free, stress-free future.
We don’t blame you if all the talk about America’s student debt crisis has you on edge. Let’s face it, Americans collectively owe more than $1.3 trillion in student loans—and that rate is growing by the thousands per second.
No doubt, it’s a pretty big deal and a drain on the economy. But just because others are struggling under the weight of their debts doesn’t mean you have to. So instead of watching the debt clock tick higher and letting your debt crush you, let’s turn the table and crush it. Here are some strategies to get you started:
Get a job at PwC (or somewhere like it)
Think we’re kidding? PwC has a new recruiting trick up its sleeve—student loan assistance. The #2 accounting firm in Chicago is offering $1,200 per year to potential college recruits as it works to attract the best and brightest talent. The firm also is rolling out the offer to associate and senior associate level pros. Some experts say this could become a more common benefit offered by private sector employers looking to differentiate themselves and gain an edge in competitive sectors. There also have been cases where employees negotiated for untraditional benefits, such as foregoing a 401(k) in exchange for student debt payments. It doesn’t hurt to ask, right?
Consolidate your loans
Student loans come in all shapes and sizes from all sorts of sources. If you have multiple loans, the easiest way to get them under control is to eliminate them. Consolidating and refinancing your loans is certainly worthwhile if you can secure a new loan that allows you to pay off all your loans (or at least the ones with crushing interest rates) and lowers your overall interest rate. If you gain some flexibility with the payment terms, even better. To do this, talk with your lender about the options they offer. If they can’t offer you more favorable terms, try Credible, an online marketplace that helps you find offers from qualified lenders.
Grow your credit
Continuing on the debt consolidation road, you could also take USA Today’s advice and transfer a small student loan balance to a new credit card (but beware of the interest rates). As their contributor notes, “Responsible use will add positive information to your credit reports each month and cause your credit score to rise. … You may also have the option of transferring a portion of your balance to a credit card that allows you to pay it down at a lower rate of interest. Most credit card companies accept balance transfers from student loans, and it can make sense if you’re disciplined and you find the right deal.” What’s more, “A growing number of banks, including Wells Fargo and Discover, have announced plans to help many swamped student borrowers by reducing interest rates, extending repayment terms and even forgiving balances on certain private student loans.”
Find the best ROI
As you’re putting your financial house in order, a top concern should be getting the best return on the dollars you have. This means deciding if paying off your loans quickly will leave you better off than investing elsewhere. In most cases, the smart choice is tackling your highest interest loans first, but Student Loan Hero’s Payoff vs Invest Calculator can crunch the numbers for you.
Pay off balances early and often
The quicker you pay off your loan the less interest you pay. Simple. So if you can afford to pay more than your minimum balances, do it. This may mean living a little more frugally, prioritizing your purchases, or picking up an extra job, but the benefits could be well worth it. Again we send you over to Student Loan Hero to put their Loan Prepayment Calculator to work. This simple tool shows you how much you can save and how fast you can repay your loans by changing your payment amounts. Bonus tip: Automate your payments so you never miss one.
Don’t forget your tax deduction
The one good thing about student loan interest? It’s tax deductible, meaning the amount of student loan interest you report on your tax return reduces the amount of income you pay taxes on. Getting a big tax refund? Turn around and make an extra debt payment!
If you’re in a tight spot or don’t know where to turn for more info, the U.S. Department of Education’s Federal Student Aid website offers resources on everything from finding payment plans to resolving disputes with lenders.
Debt can be a heavy burden. It may keep you up at night or hold you back from accomplishing your goals. But if you make a plan and stick to it, you can crush your student loans instead of letting them crush you.
Got a student loan tip to share? Leave it in the comments section below.
Derrick Lilly is the Illinois CPA Society’s assistant director, communications and publications, and editor of INSIGHT Magazine. Derrick is an avid actions sports enthusiast. When he’s not riding some sort of wheeled contraption, he enjoys music, photography and investing. Thankfully, he has a high credit rating and no student loan debt.