In Part 1 of this blog, a brief background understanding was explored of the issue of student loan stress as well as ways to emotionally handle and keep perspective about the issue rather than getting overwhelmed. This second part will look at practical ways about how to the manage student loans. Of course everyone’s financial situation is different, depending on the amount of total student loan balance they have, if their parents assisted, if they are paying alone or with the assistance of a spouse, if they have a mortgage, the cost of rent, and other expenses. Some people desire to repay their loans aggressively while others prefer to pay slow and steady to maintain a certain standard of living.
Create a manageable budget.
Upon getting an idea of the total balance and monthly payments due for your student loans after graduation, start to calculate your expenses around it. If you are interested in paying your loans off quickly, calculate your budget in a way where you are able to pay extra towards the loans. Some people like to do the “snowball” method where they pay more on the smallest loans and gain momentum with paying extra in order to pay off one loan at a time. This option can be encouraging and hopeful to start to see the payoff and elimination of one loan at a time. This option may not be for everyone.
Set up an income-based repayment.
With this option, through your managing lender you answer a series of questions based upon your income (excluding your spouse’s) and family status (if you have children), and re-certify each year what your income is.
Consider brief periods of deferment.
Most loans allow for up to six months of deferment, which may helpful for temporary financial hardship, a job change, or moving. While there is no penalty, the downside to keep in mind, is that some loans accrue interest during the deferment period.
Meet with a financial planner
You may consult with financial professionals such as an accountant or a local credit counseling agency. It can be a good idea to plan to talk to different credible professionals as well as family and friends in or to make knowledgeable and wise decisions in planning for repayment of your student loans. You may also speak with other professionals such as an investment advisor to decide if it makes sense to focus on paying off the student loans, or if it would make more sense invest at the same time, so that you still have retirement and investment funds later in life.
Depending if you took out federal and private loans, you may look into lower interest rates. This is usually only a good option for those optimal credit, so this option is not for everyone.
Meet with an attorney that specializes with student loans.
There are several attorneys that specialize with student loan debt management. I was recently able to consult with one for a family member and found the advice to tremendously useful. It is good to explore around for the attorney that has the most specialty and expertise before paying for a service. While there are many attorneys that claim to work with debt management, some do not possess specialized knowledge with all of the student loan options. An attorney that specializes with student loans should also have knowledge about private loans as well, even including settlement options.
There is not a “one-size-fits-all” repayment plan, but there are several strategic options worth exploring. If you are struggling with handling the stress of student loans, you may find it helpful to speak with a supportive and encouraging professional therapist.