If you’re struggling to pay off your pesky student loans, you’re far from alone. According to Make Lemonade, there are more than 44 million student loan borrowers in the US who hold more than $1.4 trillion in student loan debt. By itself, this statistic is hella scary. But when we start to consider the fact that two-thirds of the total student loan debt belongs to women, it becomes shockingly clear why a *ton* of American women end up paying off their school-related debt well into their 40s.
We talked to SoFi’s Student Loan Refinancing Director of Product Marketing Anna Khayet for her top tips for paying off student loans as fast as possible. Pour yourself a summery rosé and take out your old college notebook — it’s time we finally understand the nitty-gritty details of our student loans.
B+C: A study from the OneWisconsin Institute found that it takes graduates of Wisconsin universities almost 20 years to pay off a bachelor’s degree and 23 years to pay off a graduate degree. If we assume that this is similar across the country, that means a lot of people are still struggling to pay off their student debt decades after they graduate. What are some things recent grads can do now to set themselves up to successfully pay off their debt before their 40th birthday?
AK: Once you set aside a three-month emergency fund, make student debt payoff your top priority ahead of other savings and investment opportunities. Find the student loan with the highest interest rate and make your biggest payments against it every month — more than the amount requested by your servicer. This will help you pay the least in interest.
B+C: Speaking of new grads, students with a federal student loan are given a six-month grace period before they have to make their first loan payment. What are some things graduates can do during this period to set themselves up for financial success?
AK: Pretend the grace period is not there and start paying off your student loans as early as possible. Interest starts capitalizing on your student debt as soon as you graduate. Savvy grads realize that every month you defer payment, the interest on your student loans gets applied to a new, larger balance.
B+C: Can you quickly describe the key differences between federal and private student loans?
AK: Federal student loans offer borrowers protections and benefits. Borrowers may be eligible for income-based repayment plans, loan deferment (in case of loss of work or other extenuating circumstances), and loan forgiveness if the borrower works in public service. Federal loans also have generally favorable interest rates, ranging from 3.4 percent to 7.9 percent. The rates are set based on the year you borrowed and whether you borrowed for undergraduate or graduate education. Private loans often come with higher interest rates depending on a borrower’s credit profile, and most don’t afford the same protections that federal loans do.
B+C: Okay, say a student takes out several loans to get them through college. What are some practical tips that can help them manage all of their loans effectively?
AK: You can change your payment due date. If you get paid after your student loans are due, call up your service and set a new payment date. Set up autopay — you’ll get a 0.25 percent discount on the interest rate. These little improvements add up! And the money is automatically deducted from your account every month, so you never make late payments or incur late fees.
B+C: What are the benefits of consolidating your loans? Is this something that we should be considering?
AK: If the federal student loan protections apply to you (if you are unemployed, work in public service, or have low income or an unstable work situation), consider consolidating your loans. This will combine your federal student loans into one loan with the weighted average interest rate of the previous loans and one simple monthly payment. Just get in touch with your loan servicer to start the process.
If you have a strong income and don’t work in the public sector, student loan refinancing could be a good option for you. That’s the business SoFi is in. We combine federal and private student loans into one and give the borrower a low monthly interest rate. Members who refinance with SoFi save $22,359 on average, or $288 a month on their student loan payments (plus there are all the other perks like free dating events, wine tastings, and sky diving).
B+C: What really happens when you can’t afford your student loan payment for the month?
AK: All federal student loans and some private ones are eligible for deferment or forbearance, which allows you to temporarily stop or reduce your payments in order to avoid default. With a deferment, you’re generally not responsible for paying the interest that accrues on subsidized loans, but with forbearance, you are responsible for paying interest on all types of federal loans. To request deferment or forbearance, you’ll need to submit a request to your loan servicer.
B+C: Should we be looking for a gig that has an employer-sponsored loan repayment plan? How common is it for employers to set up these types of programs?
AK: SoFi partners with seven out of the top 10 Fortune 500 companies to offer student loan repayment benefits. Employers are quickly realizing that student loan repayment plans help them attract and retain talent. If your employer doesn’t offer a program, refer them to us today. We can help!
B+C: Finally, are there any apps or resources you can recommend that will help us better understand and plan for our student loan repayment?
Are you still paying back your student loans? Tweet us your stories by mentioning @BritandCo.
(Photos via Getty)