4 Simple Approaches to Student Loans

Student loans are the most common type of personal finance loans that exist in the United States. 45 million people currently have active student loans. The total student loan amount in the U.S. totals more than 521 billion more than credit card loans. Because the statistics are so high, it’s important to understand the structure of student loans, even if you personally don’t have student loans.

1.Research!



If you have student loans, do your research! This seems like simply advice, but it is so often ignored by people paying off student loans. Get a handle on the website where you can access student loan amounts and repayment options–it’s probably studentloans.gov. Calculate your interest rates and current payment plans. Over half of students didn’t do any research when taking out the loans in the first place! Even if that’s you, it’s not too late to do research now. Only a couple hours can greatly increase your peace of mind and reduce anxiety over time.

2.It should be your first or second payment

You should always pay off credit card debt first, because this usually carries the highest interest rate. Student loans probably represent your second highest interest rate payment, and should be paid second, or first if you don’t have credit card debt. If you’re carrying student loans, you probably shouldn’t be thinking about investing, unless your interest percent is lower than a reasonably expected return on investment (it probably isn’t). The sooner you pay off those student loans, the less you have to pay in the long run, and the sooner you can build a better investment portfolio. It’s tempting to get that portfolio started early, but it probably won’t help you in the long run.

3.Refinance?



Tons of refinancing programs exist for student loans, offering you a variety of catchy titles, infographics, and inspirational testimonials. Here’s the truth: no refinancing program, however flashy, will remove the anxiety and stress that come with loans. Refinancing programs often sell themselves as a way to forget about loans and live your best life. It’s important to understand that a couple types of refinancing programs exist–federal student loan consolidation, and private programs. Private refinancing programs may offer you better interest rates and repayment options. Your loan is paid for by a private company and consolidated–but this means you are no longer eligible for certain federal programs, like income-driven repayment and forgiveness options. Refinancing may help you, but make sure to do your research, feel out all your options, and don’t simply jump into a program because they promise you less stress or easier paperwork.

4.Make your first student loan payment

No, this is not throwing shade! This is specifically for people about to graduate, or who have just graduated. Most student loans have a 6-month grace period, where you don’t have to pay after immediately graduating. Don’t put off making payments until after this period! Even if it’s just a hundred dollars, make a payment in the first month after you graduate. Get in the habit of reducing your student loan debt. Not only does it help with interest, but it mentally prepares you for the burden of paying off your loans. Don’t roll into your first payment without putting in a dime for 6 months!



Research, make it a priority, look into refinancing but don’t think of it as salvation, and make your first payment early. Mastering student loans isn’t about beating the system. You won’t refinance and wish away all your debt. Look into what programs are available and pick your best option, then make it a priority and begin paying them off before you need to. Always remember why you took out student loans in the first place–more than just the degree or your major, student loans were about making you the person you became during college.