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A guide to paying down your college debt

Individuals 05.30.2018 4 MIN READ

Managing college debt is a critical component to the financial health of the student or parents responsible. Discover common sense solutions such as consolidation, prioritizing, extra principal payments and budgeting to help you take control of your college debt.


Graduating from college is exciting. It means starting a career, enjoying a new period in your life and experiencing new things. For parents, it may be a time of relief that the tuition bills will stop coming.

It also means that it’s time to start paying off potentially tens of thousands of dollars in college debt you’ve accrued over the last four years.

Just the idea of paying back that debt can feel daunting. The average college graduate leaves school with more than $28,000 in debt, according to a 2017 study from The College Board. Even if you have a high-paying job to start your career, affording your monthly college payment while trying to manage your regular expenses—like rent, food, and a car loan—can be difficult.

Take solace in knowing you’re not alone. A whopping 42% of millennials have student loans and 79% of them report those loans to be negatively impacting their personal financial goals. But with the right plan, you can pay off your college debt as quickly and efficiently as possible.

Read on for ideas on paying down your college debt.

Consider consolidation

Chances are you have several loans that you’ve accrued over the course of your college career. Managing them all can be a challenge, and if you miss a payment, your credit can be affected.

Consolidating your loans, then, might be a good idea.

By consolidating your loans, you’ll have a single monthly payment. And in some cases, lenders will be willing to lower your interest rate if you set up automatic payments on that single loan. Shop around to find a bank that offers you the most competitive rates and terms. With a lower rate and single payment, you’ll simplify your monthly bills.

Be aware of any potential disadvantages of consolidation, such as increasing the total cost of your loans if you select a longer payback period, and losing the ability to pay off higher interest loans first. Also certain federal debt relief programs do not transfer to private refinance loans.

Analyze your budget

Now it’s time to create your budget. Take your monthly net income—the remainder after tax withholdings, and automatic deductions such as a 401(k) or a health savings account (HSA).

Now, add up all of your fixed expenses, like your student loans, rent and car payments, and plan for variable expenses, like your dining-out costs or charitable contributions. Deduct these from your spendable income. Ideally you’ll have something left over for an emergency or slush fund.

Prioritize your payments

An alternative to consolidation is to prioritize your debt by interest rate. Imagine a pyramid with your higher rate loans as the base. In descending order of interest rate, stack your other debts culminating with the lowest rate debt at the top. Include credit cards, car loans, and mortgages alongside your student loans.

Whenever you have some extra cash to put down, make additional principal payments to the highest interest loans at the base of the pyramid. Once the highest-interest debt is paid off, while making minimum payments on the rest, move up the pyramid until you’ve paid off all sources of debt.

Having a smart plan that focuses on quickly paying off your most expensive debt and not just your student loans could save you thousands of dollars in interest charges and extra payments.

The power of additional payments

Most financial institutions will allow you to make additional principal payments on your student loans to pay them off more quickly. And although an extra $40 or $50 a week might not sound like much at the time, when you consider how much you’ll save over the long-haul, it might just be worth it.

For instance, if you have $50,000 in student loan debt and payments of $575 per month for a period of 10 years, you’ll end up paying $69,000 in principal and interest. But if you pay just $40 extra per week—the cost of a few coffee runs—you’ll pay off your loans in seven years. Better yet, your total cost for principal and interest will only be $63,500, saving you $5,500.


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