How to Lower Your Debt After College
- The average debt for student loan borrowers is around $30,000 according to a Federal Reserve report.
- Setting and tracking a monthly budget can ensure you have the money to pay your loans and other bills.
- If you’re having difficulty making payments, consider refinancing your loans or exploring repayment plan options.
You graduated college with a shiny new degree and the promise of a brighter future. But if you left school with high student loan debt and are struggling with meeting your monthly payments, your financial future can feel a little cloudy.
You’re not alone.
According to a report by the Federal Reserve, total student loan debt including federal and private loans reached $1.75 trillion with nearly $30,000 owed per borrower on average.
The good news is you have the power to take charge of that debt. Here are some ways to help you:
- Create and stick to a budget. Budgeting is an essential skill that can ensure you meet your bills and reach your goals throughout your life. Start by determining and tracking your monthly bills and income to see how much money you have left over and how you are allocating your money each month. For extra budgeting help, check out these apps that make budgeting easy.
- Live within your means. After creating your budget, you’ll determine the amount of spending money you have every month. If you don’t have enough money left over after paying bills, cut your expenses; never spend more money than you have.
- Know what you owe. Inventory all your debt, including student loans and credit cards. Make sure you understand the types of loans you have (federal or private student loans) and the interest rates.
- Avoid credit cards and other high–interest debt. The last thing you need is more debt, including costly credit card debt. If you already have credit card debt, focus on paying off high-interest debt first, which can add up and be a budget killer.
- Consolidate or refinance student loans. If you’re having difficulty making student loan payments, you could refinance to combine and replace your existing student loans with one lower-interest loan and payment. Refinancing can help you get a lower interest rate or extend the term of your loan to reduce your monthly payments.
- Build an emergency fund. Unexpected circumstances can happen in life, such as car repairs, medical expenses, or job loss. An emergency fund can be a safety net to help you manage those expenses. Experts recommend you have at least three to six months of expenses in a liquid savings account.
- Boost your income. Consider getting a part-time job or side hustle, or selling items you no longer need to get extra cash. If you have a full-time career, look into training opportunities to help build your skills and earning potential.
- Set up automated payments. Paying your loans automatically will ensure you never miss a payment or have to pay costly late fees. Some lenders even offer rate discounts when you pay automatically.
- Negotiate interest rates and/or repayment plans. If you’re having difficulty making your federal student loan payments, contact your lender/servicer and explain your situation. With federal loans, you may be able to negotiate a repayment plan based on your monthly income. Learn more about repayment plans.
- Seek loan forgiveness programs. In some circumstances, you can have your loans forgiven, cancelled or discharged. Loan forgiveness programs may be offered by an employer or lender or through government assistance programs. Be on the lookout for forgiveness opportunities available and watch out for loan forgiveness scams.
- Seek financial counseling if needed. One of the most important steps you can take if you’re having difficulty with your loans is to seek help from your lender. Ignoring your payments will only result in penalties and damage to your credit score, which can impact your ability to meet your goals in life, such as buying a home or car.
Brazos is here to help you reduce those high college payments
For more than 40 years, Brazos Higher Education has been helping make education more affordable for students and parents. As a non-profit, we can help you consolidate and refinance high-interest student loan debt and take charge of your loans and financial life. Contact us today!