Illinois ranks seventh among the states with the highest student loan payments. Here’s how to make those payments more manageable.

CHICAGO, Oct. 28, 2024 – A college degree is an important investment, but it’s also a costly one. With a little more than a year passing since the moratorium on interest on federal student loans ended, a new report from WalletHub highlights that more than 42 million Americans owe more than $1.61 trillion in student loan debt—an average of $38,000 per borrower. Accounting for a fixed interest rate of 6.53% on federal undergraduate loans, it would take 20 years’ worth of $284 monthly payments to pay off that $38,000 debt.

WalletHub found that monthly student loan payments vary widely across the country. Here in Illinois, which ranks seventh among the states with the highest student loan payments, the median monthly student loan payment is $206.

With this in mind, and with October being National Financial Planning Month, it’s the perfect time to study up on smart money management tips. The Illinois CPA Society (ICPAS) suggests borrowers consider these tips to help pay down student loan debt faster and begin investing in a long-term financial plan:  

1. Apply for an income-driven repayment plan. Federal Student Aid’s income-driven repayment plans set your monthly student loan payment at an amount that’s intended to be affordable for you based on your income and family size. Individuals who qualify may be able to lower their monthly payments or possibly earn loan forgiveness after a certain number of qualifying payments. The clock is also ticking on certain loan forgiveness programs with tax-free status, so the time to act is now.
2. Make your payments—and savings—automatic. If you’re working and have your paycheck directly deposited, you could elect to have portions of your paycheck automatically diverted toward loan repayments and savings and retirement accounts. This is a great budgeting practice that’ll help you repay your loans on time (and faster if you elect to pay more than the minimum payment due) while also setting aside money for your future without having to think about it.
3. Refinance your student loans. Take note of your student loans and their interest rates. Sometimes, consolidating and refinancing eligible loans can lower your overall interest rate and make meeting the repayment obligations easier. If refinancing isn’t an option, prioritizing paying down the loans bearing the highest interest can pay dividends down the line.
4. Redirect your discretionary spending. Cutting back on unnecessary spending is a smart way to save. Although it takes discipline, reining in discretionary spending whenever possible affords you more money to allocate toward paying down high-interest debt and boosting your long-term savings.

You made the decision to invest in your education—make sure it pays dividends. If you’re unsure of how to navigate your finances, a CPA—a certified public accountant—can help. A CPA can guide you through formulating a long-term financial plan that also maximizes the tax deductions available on qualifying student loan debt and educational expenses. ICPAS’ free “Find a CPA” directory can help you find the trusted, strategic advisor that’s right for you based on location, types of services needed, and languages spoken. Find your CPA at www.icpas.org/findacpa.