There are likely lots of reasons why you have not yet been able to get rid of that student loan debt. It can seem like a daunting task even if you are like Jeff and tracking loan repayments each month. Even if you’re making payments on time every month, you may not be making as much progress in paying off your student loan as you would like.
You’re Not Alone
Of the students that go to college and graduate, two thirds have debt. The average student graduates with $27,000 in student loan debt. This average comes from students who graduate from not-for-profit schools. For-profit schools often don’t release their data to the public, but it is generally known that their tuition (and, therefore, student debt) is higher.
You’re also not alone if you are struggling to make your payments on a regular basis. More than five million people with student loans have at least one past due, according to the New York Federal Reserve.
Collectively, the student loan debt has passed $1,000,000,000,000. If you don’t feel like following all of those zeros, that number reads one trillion dollars. The student loan debt has passed auto loan debt and credit card debt.
Are you on the right payment plan?
There are many options for repaying federal student loans. Make sure you are making the most of your monthly payments by being on the best plan for your situation. Here is a list of payment plan options from the Department of Education.
- Standard Repayment Plan – This ten-year plan has a fixed payment of at least $50 every month. This plan has the least amount of interest compared to all of the other plans.
- Graduated Repayment Plan – This ten-year plan has payments that start low and gradually increase.
- Extended Repayment Plan – Payments can be either fixed or graduated. Plan is increased to 25 years. You will pay much more interest on this plan.
- Income-Based Repayment Plan – Payments will be 15% of income and will change as your income changes. Plan can go up to 25 years. You must have a financial hardship to be applicable.
- Pay As You Earn Repayment Plan – Payments will be 10% of income and will change as your income changes. You must have a financial hardship to be applicable. Outstanding balance can be forgiven after 20 years of qualified payments if not paid in full.
- Income-Contingent Repayment Plan – Payments are calculated based on income. Any outstanding balance after 25 years of qualified monthly payments can be forgiven.
- Income-Sensitive Repayment Plan – This is a ten-year plan that is based on annual income. The lender will determine the monthly payment.
If your loan is private, you will have to discuss options with your lender. There will most likely be less flexibility with payment options on a private loan than with federal loans.
Are you paying as much as you could be?
If you are only paying the minimum amount every month and still have some cash left over at the end of the month, that money should be put towards your student loan.
Are you spending too much on socializing? Can you get rid of that gym membership? If you do not have extra cash at the end of the month and would like to dedicate yourself to paying off your student loans, consider making adjustments to your budget.