How To Easily Relieve Student Loan Debt In 2024

How To Easily Relieve Student Loan Debt In 2024

Large sums of college debt can likely prevent you from achieving other financial goals, such as buying a home or saving for retirement.

Based on reliable data, new college graduates with student loan debt typically owe approximately $30,000. It is always a good idea to review your student debt repayment strategy.

However, before tackling your educational loans, you should attempt to pay off high-interest debt and accumulate enough emergency and retirement savings. If you don’t address these things first, you’ll eventually run into further financial troubles.

Regardless of your position, there are some simple steps you can take to relieve stress and save money in the long term.

Ways To Relieve Your Student Loan Debt Easily In 2024

1. Calculate Your Total Debt

The first step in dealing with any sort of debt is to determine how much you owe. Students frequently graduate with multiple loans, both government-subsidized and private, having negotiated for fresh finance each year they attended school.

Only by understanding the complete amount of your debt can you devise a strategy to pay it down, consolidate it, or maybe seek and receive forgiveness.

2. Understand The Terms

As you calculate the quantity of your debt, familiarize yourself with the terms of each loan. Each may have a different interest rate and repayment terms.

You’ll need this information to create a repayment strategy that avoids additional interest, fees, and penalties.

3. Examine The Grace Periods

Your loan type will determine the specific grace period. You will discover that every loan includes a grace period when you piece together the details. This is how long you have after graduation before you have to begin making loan repayments.

For instance, the grace time for Federal Family Education Loans (FFELs), Direct Unsubsidized, and Direct Subsidized loans is six months, whereas the grace period for Perkins Loans is nine months.

• Direct Subsidized Loans: During your six-month grace period and while you are enrolled in school, you will not be assessed interest.
• Direct Unsubsidized Loans: From the day of your first loan disbursement that is, the day you get the money from your school interest begins to accrue.

4. Apply the Avalanche Debt Strategy

Paying off the debts with the highest interest rates first is usually the best course of action when it comes to debt reduction strategies.

Budgeting a sum above the needed monthly payments and allocating the excess to the loan with the highest interest rate is a popular strategy.

After that loan is repaid, apply the entire monthly balance (normal payment plus overage) to the next loan with the highest interest rate, the third-highest, and so forth, until you have no debt left. This approach is a variation of the debt avalanche strategy.

Debt Avalanche Strategy Example

Let’s say your monthly student loan debt is $300. Of that, a $100 payment is required on a loan with a 4% interest rate, a $100 payment is due on a loan with a 5% interest rate, and so on.

You would budget $350 to pay down your student debts, allocating the additional $50 to the 6% loan first, as compared to $300.

After that loan is repaid, you would apply the $150 you originally used to pay it toward the 5% loan, making your monthly payment for that loan $250 instead.

The remaining 4% loan would be repaid at a rate of $350 per month until the total amount of your student debt was settled after the 5% loan was wiped off.

5. Understand What Makes Student Loans Unique

Interest on student loans keeps rising once the loans are given, and borrowers should expect to pay more than they originally borrowed.

However, several distinguishing features of student loans can help you make better-educated financial decisions. Whether you have a subsidized or unsubsidized federal loan, you are responsible for any interest accrued during the forbearance period.

If you have a subsidized federal loan, the government will pay your interest while the loan is in deferred status, such as while you are still enrolled at least half-time in school or during your six-month post-school grace period.

6. Magnify Your Payments

Students fail to understand that you don’t have to wait for any time before you start repaying your debt. Magnifying your payment in advance is very important, and it is very comforting to start paying your student loan.

(a) Make payments while you are at school: If you have not yet graduated or are pursuing a graduate degree, you can relieve your loan by continuing to make payments during your in-school deferral period.

Also, if your student loans are still accruing interest while you are in school, strive to pay it each month. That way, you avoid capitalization (and paying interest on your interest) after graduation.

(b) Pay above the minimum: Adding a tiny extra to your normal student loan payment can help you reduce your overall debt.

Let’s imagine you have $30,000 in student loans with a 5% interest rate. With a 10-year payback period, you may expect monthly payments of $318. If you pay an extra $100 every month, you can save almost $2,500 and pay off your loan in three years.

(c) Use the found money: Even one lump-sum student loan payment can significantly reduce your overall debt and repayment time.

Consider the previously mentioned loan: If you make an additional payment of $3,040, which is about the average tax refund amount for 2022 filers according to the Internal Revenue Service.

You could pay off your loan about 15 months sooner. If you devote your tax return to your student loans every year, you may be able to cut your loan repayment time in half.

(d) Make biweekly payments: Making half payments every other week, rather than full payments once a month, results in one extra payment per year.

Biweekly student loan payments also allow you to pay off your debt a full year sooner and reduce your overall costs. For instance, on a $30,000 loan at 5% interest, you will pay approximately $950 less.

(e) Save money by using autopay: Signing up for autopay might result in interest rate savings from several lenders. According to NerdWallet, the most typical discount is 0.25%.

Although this won’t dramatically reduce your student loan debt on its own, if you keep to the original payment level, a 0.25% interest rate cut on the $30,000 loan will shorten the repayment period by two months.

However, you can get a significant boost and make sure you never miss a payment by combining this strategy with others.

7. Pay Down Principal

One popular method for relieving student debt is to make extra principal payments whenever possible. Throughout the loan, you will pay less interest the sooner you reduce the principal.

Because interest is computed monthly using the principal, a smaller principal amount results in a smaller interest payment.

Rarely, after your schooling, you might receive extra money from student loans. For instance, it’s possible that you were awarded a scholarship that you weren’t expecting.

Even though you have the option to utilize the money for something else, it makes more sense financially and morally to apply it to your debt.

If you mishandle money obtained through government-subsidized loans, you may also be subject to legal action.

8. Make an Automatic Payment

Many private lenders as well as federal student loans will lower your interest rate if you agree to have your payments deducted automatically from your checking account monthly. For instance, 0.25% off is offered to Federal Direct Loan Program participants.

9. Explore Defer Payments

You can request a payment delay from your student loan lender if you do not yet have a job. Depending on the terms of your loan, the federal government may or may not charge you interest during the authorized deferment period if you have a federal student loan and are eligible for deferment.

You might be able to request forbearance from your lender, which enables you to temporarily cease making loan payments for a predetermined amount of time if you are not eligible for deferment.

Any interest owed during the forbearance period will be added to the loan’s principal during the forbearance term.

10. Request Payment From Your Employer

Repayment of student loans is a part of several employer benefits packages which is one of the good student loan debt relievers that can take you there. Fidelity Investments, for instance, will settle your student loan debt for up to $15,000.

Still, this is a unique advantage, so find out what your benefit involves and whether you qualify for student debt repayment by contacting your HR department.

11. Use Refinancing To Your Advantage

Refinancing your student loans may not immediately reduce your loan debt but it can reduce your payback amount and shorten your repayment period.

To refinance your student loan at the best rate, you must have a steady income, a credit score in the upper 600s, and a debt-to-income ratio of 50% or better.

You may also receive a higher offer if you include a competent co-signer in your application. However, before you do so, be sure you and your co-signer understand the implications and agree to the terms.

If you refinanced your $30,000, 10-year student loan at 5% interest to a seven-year loan at 4% interest, your monthly payments would increase by around $92.

However, you’d pay off your loan three years sooner while saving little more than $3,700. When researching student loan refinance offers, seek for those with lower interest rates and shorter repayment durations than your current loan.

This will allow you to reduce overall costs while also paying off your debt as quickly as possible. This refinancing technique is likely to boost your monthly payment.  But if it doesn’t, commit to paying at least what you did before for an even faster reward.

However, refinancing your federal student loans will result in the loss of federal benefits. Before doing so, you should be certain of your work position and ability to pay the new cost.

12. Find Loan Forgiveness

You could be eligible for an application for debt forgiveness or the discharge of your student loan in some exceptional cases.

If your school closed before you completed your degree, if you filed for bankruptcy, or if you became completely and irreversibly incapacitated, you might be qualified.

If you have been employed as a teacher or in another public service capacity, you may also be eligible for a less drastic but more focused student loan forgiveness.

The United States Supreme Court declared in June 2023 that the Biden administration’s plan to forgive student loan debt was unconstitutional.

In response, President Joe Biden announced that the Department of Education would seek an alternative plan to relieve student debt, this time based on the Higher Education Act.

(a) Public Service Loan Forgiveness: Through the PSLF program, public servants including government and nonprofit employees may be qualified to have the outstanding balance of their federal student loan debt canceled after ten years of repayment.

To determine if you are employed by an eligible company and to create your PSLF form, utilize the Federal Student Aid PSLF Help Tool.

(b) Closed School Discharge: You might not be required to pay back your student loan debt if the school you attended closed either during your time there or not long after you left.

To be eligible for a closed school discharge, you must apply through the Education Department and fulfill many requirements.

Your loan servicer will notify you if your debt is discharged automatically, which happens in certain circumstances.

(c) Borrower Defense to Repayment: Through the borrower defense program, you might be able to have part or all of your student loan debt canceled if your institution committed misconduct while you were enrolled.

In certain cases, you might even be eligible for a refund of previous payments. On the FSA website, you may begin your application and learn more.

(d) Teacher Loan Forgiveness: Up to $17,500 in total federal Direct and Stafford loan discharge may be available to teachers who work full-time at a low-income school for five consecutive academic years.

You must be a highly qualified teacher who satisfies the qualifications set forth by the FSA.

(e) Total and Permanent Disability Discharge: If a borrower becomes permanently handicapped, they may be eligible to have all of their student loan debt erased.

The Department of Education uses Social Security Administration data to automatically identify eligible TPD beneficiaries.

13. Consider Consolidation

After you have all the information, you might want to consider combining all of your loans. Consolidation has the major benefit of frequently lessening your monthly payment burden.

Additionally, it can extend your payback period, which is both a benefit and a curse because it will result in higher interest costs.

Furthermore, you might be paying a greater interest rate on the combined loan than you are on some of your existing loans. Make cautious to evaluate the terms of your loans before committing to a consolidation.

However, Direct PLUS (Parent Loan for Undergraduate Students) loans may result in the loss of certain advantages like discounts and rebates.

14. Sign Up In an Income-Driven Repayment Plan

Your monthly payment under these programs will be restricted to 10% to 20% of your disposable income, depending on the size of your family and the IDR plan type you select.

Perhaps the most significant factor is the possibility of future student loan forgiveness, aside from the evident advantage of greater affordability. Your remaining debt will be discharged after twenty or twenty-five years of repayment.

The four income-driven repayment programs available to borrowers with federal student debt vary based on the kind of federal loans they have:

(a) Income-Based Repayment Plan

(b) Income-contingent Repayment Plan

(c) Pay As You Earn Repayment Plan

(d) Revised Pay As You Earn Repayment Plan

15. File for Bankruptcy

However, it should only be considered a last resort when all other options for repayment, such as income-driven repayment, deferment, and forbearance, have been exhausted.

Filing for bankruptcy due to student loan debt can be a good option for borrowers who are facing unjustified hardship because of the high amounts of debt that are in default.

It can be feasible to have your student loan debt discharged in bankruptcy, even though the procedure can be challenging and costly.

In most situations, having private student loans as opposed to government student loans makes it simpler to get your debt discharged through bankruptcy.

Be advised that filing for bankruptcy will leave a permanent bad impact on your credit history, making it more difficult for you to get approved for a mortgage or even to rent an apartment.

Before making a choice, give this alternative careful thought and speak with a nonprofit credit counselor and a bankruptcy attorney.

Check Out What Everyone’s Getting Wrong About Student Loans video below:

FAQs

How can I get out of student loan debt?

1. Organize your debt from student loans and create a repayment plan.
2. Make further payments.
3. Make a loan forgiveness application.
4. Benefit from interest rate discount.
5. Leverage tax deductions and credits.
6. Make biweekly payments.

What is the fastest way to pay off student debt?

• Pay extra.
• Configure recurring payments.
• Take a collegiate part-time job.
• Respect your spending limit.
• Take into account refinancing.
• Make a loan forgiveness application.
• Cut the interest rate that you are paying.
• Benefit from tax deductions.

Can student loan debt be Cancelled?

Yes! Student loan debt can be canceled. As borrowers reach certain milestones, their loans will be forgiven if they have made qualified payments for IDR forgiveness for 20 or 25 years (240 or 300 months).

As soon as borrowers complete the necessary number of months for forgiveness, ED will continue to discharge loans.

Can you escape student loan debt?

No, you can’t escape student loan debt, but you can have all or a portion of your student loan debt forgiven through a variety of loan forgiveness programs.

Public Service Loan Forgiveness (PSLF), which erases your remaining federal loan total after 120 timely payments while employed by an eligible company, is one of the most well-liked choices.

How do I know if my student loans will be forgiven?

After you’ve made loan payments for 20 or 25 years, your loans ought to automatically be erased. Speak with your loan servicer about any necessary actions that may be required.