Dear Dr. Don,
I owe about $30,000 in student loans. I’m only 2 months into paying these bills, and I am finding it a little overwhelming. Already, I’ve lowered my monthly repayment plan, and I’ve cut my monthly spending habits to a minimum. What else can I do to better manage these loans? I don’t want to be paying forever.
— Katie Collegian
First of all, you have my sympathy. It is understandable that you are feeling the burden of this debt. Unfortunately, we know that many young people are in the same proverbial financial boat with you. So, I’m glad that you thought to ask the question.
What kind of loans do you have?
If you have federally guaranteed student loans (instead of private student loans), you may have consolidation options that reduce the size and number of payments. Consolidation options are not as easy to structure with private student loans.
A new program
Check out a new loan program called the “Pay As You Earn Repayment Plan.” It was created for eligible Direct Loan Program borrowers a few years ago. If you qualify for this loan program, it can reduce your monthly payments.
If you haven’t done so already, see if your lender offers an interest rate reduction for automatic debits. It’ll keep you from missing loan payments, and it’ll cut down on your interest expenses.
Better times ahead
Your income should outgrow these tight times in your monthly budget. When you can free up the funds, consider making additional principal payments on the loans. If you can do so, you’ll cut your interest payments and be in a much better position to pay off those loans.
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- How long will it take to pay down debt?