A college education is more expensive than ever. If you had to take out multiple loans to cover the cost of university, you are not alone. With over 45 million student borrowers in the country, many students have both federal and private student loan debt. Having multiple outstanding loan balances with different rates and payment amounts can get confusing. Moreover, it can make the stress of debt feel even more overwhelming. It is not all hopeless, though! Here are some steps you can take to get student loans from multiple lenders under control.
Assess Your Financial Standing
Keeping track of all your bills can feel daunting, but getting your debt under control starts with organization and assessment. A good first step is to organize the letters from all your lenders. Consider creating a spreadsheet to keep track of the lender name, interest rate, and the monthly payment amounts for each loan. Organizing this information about your loans empowers you to chart out the most efficient way to pay them off.
Prioritize Your Payments
Once you have organized your different loans, their rates, and terms in one place, you can prioritize. Divide your loans between private and federal. Many people find it better to prioritize paying off private lenders first, as they tend to have higher interest rates. Additionally, public loans often offer options like income-driven repayment plans and loan deferment, which could make them less urgent to pay down.
So, what is the most efficient order to pay off your loans? You can prioritize paying down the highest-interest loans, which can help minimize the total interest you wind up paying over the life of the loans. Another strategy is to prioritize paying off the loan with the smallest balance first. After you have paid off your smaller loans, you can divert those monthly payments toward a larger loan to pay it off faster. This is the “snowball” method, because of the small payments accumulating into a big one as you pay off loans. Whichever method you choose, being thoughtful in the order you pay off your debts can save you a lot of money in the long run.
Consider Refinancing
For some borrowers, refinancing may make financial sense. When you refinance, you pay off your old debt using a new loan with potentially better terms. For example, if your income and career circumstances have changed significantly, it could be a good time to refinance student loans. Earning a higher salary that lowers your debt-to-income ratio or improving your credit score may signal less risk to lenders, and there is a chance you could negotiate more favorable terms on a new loan.
If you secure a loan with better terms, you can potentially consolidate your old loans into a single, less expensive loan. By having just one monthly payment to one lender, rather than multiple payments to multiple lenders to keep track of, you may be able to save time, reduce stress, and save money in interest over the lifetime of the loan. You should thoroughly check your options and choose the student loans company that offers the best deal. Just remember that if you refinance federal student loans with a private lender, you lose access to federal programs like income-driven repayment, federal forbearance, and any other benefits offered to federal borrowers. Learn more at studentaid.gov.
Don’t Get Overwhelmed with Student Loans
Having many outstanding debts can be very stressful. The jumble of disparate payment terms and fine print that come with student loans can seem impossible to keep track of. However, if you organize your student loans using a tool like a spreadsheet, and pay them off systematically, you may find yourself getting close to being free of student loan debt before you know it.
