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Dig Out From Under Student Debt

Dig Out From Under Student Debt

Take a debt inventory

Take stock of what you owe. After all, you can’t map a route if you don’t know your starting point. Begin with your student loans, and for each loan note how much you owe, the interest rate, the amount paid toward principal each month and the total time to pay off. Then, move on to any other debt you may be carrying, such as from credit cards, auto loans or other personal loans.

Got options? Know ‘em

Once you’ve laid out your debts, consider the payback options for each one. If you have multiple student loans, you may be able to consolidate them into a personal loan. The upside: you could get a better interest rate, lower your payments, reduce the time to pay-off and have one payment to track. The downside: federal student loans may offer deferment, forbearance and forgiveness options that will be lost; if these are features you have and want to keep, then move on.

Start prioritizing

What’s keeping you up at night? That student loan hanging over your head, or the credit card debt that has ballooned over time? If credit card payments are syphoning too much income because of relatively high interest rates, it may make sense to tackle those first with extra payments to principal.

If student loans are your nemesis, put those at the top of the list and start looking for some extra cash. It may mean living as if you’re still in college – eat out less, seek out free or low-cost entertainment, treat yourself to extras occasionally (not daily), or pick up some extra work.

Everyone likes winning

Managing student loan and other debt is a long-haul project. Sure, slow and steady wins the race, but we all need some encouragement along the way. If you have loans with relatively small balances, consider paying those off to free up some cash and notch a quick win. Crossing just one debt off a list can be a huge morale boost.