Student Loan Debt? There’s an App For That
September 08, 2014Student loans may be viewed as a form of “good debt” because of the many doors a college education can potentially open throughout our lifetime.Still, paying off student loans can become a major headache (especially if you are trying to balance other competing financial priorities like paying off credit card debt or saving for emergencies). Total student loan debt in this country now exceeds $1 trillion and 7 out of every 10 college students graduate with student loan obligations.
How do you prioritize paying down student loans versus paying off other forms of debt and saving for emergencies? In general, you should only make extra payments toward student loans once you’ve eliminated high interest credit cards and other higher interest loans. You should also have a fully funded emergency safety net account in place.
Once you decide to tackle your student loans, it is important to be proactive and work student loan debt management into your overall financial plan. Thankfully, there’s an app or website available for all things related to personal financial planning – including managing student loans. When it comes to managing student loans, here are some online resources that may help you reach your financial goals related to paying down student loan debt:
Get organized. It is easy to feel overwhelmed with student loan debt and paying off these loans often requires time and patience along with a solid strategy. A little bit of awareness goes a long way and can save you hundreds or thousands of dollars. Start off by taking time to know what you owe. This could be as simple as completing a Debt Inventory that looks at your student loans. If you are feeling really ambitious, you could even complete a Budget and Net Worth Spreadsheet that includes everything. The main idea is to organize your student loan information and see how it fits into your overall financial plan. If you aren’t quite sure about how much you owe, your interest rate, or minimum payment information, you should contact your lender or loan servicer directly, look at your most recent statement information, or track down your federal loans using the National Student Loan Data System (NSLDS). Private loan information can also be obtained by reviewing your credit report (www.annualcreditreport.com) or the National Student Clearinghouse (Meteor).
Looking for other creative ways to get organized and track your student loans? TUITION.IO provides a free service to organize all student loans together in one place. You can use this site to track balances and payment histories over time to see how you’re doing. You can even use this site to estimate different payoff options and calculate the benefits of making extra payments.
Automatic repayment plans can save you money. Recurring electronic payments can reduce the interest rate on your federal student loans by 0.25% (some private loans also offer this option). Of course automatic payments can cause problems if you don’t always have sufficient funds available to make your payment.
Refinance or consolidate debt. Another proven method to lower the cost of borrowing and put more of your money to work chipping away at those student loan balances is to refinance or consolidate loans to a lower interest rate (if available). Just remember that extended repayment plans may lower your monthly payments but they can also increase the total interest paid over the life of your loan so you might want to try to stick with the shortest loan term you can comfortably afford. Keep in mind that if you are refinancing federal loans with a private loan you may be forfeiting flexible repayment options offered by federal loans. If you have a stable income situation, this may not be as big of a concern.
Federal Student Aid — A Direct Consolidation Loan will allow you to combine different federal student loans into one loan with a single monthly payment. This Department of Education website includes a list of FAQs and explains the consolidation process.
Student Loan Hero — This site is similar to Tuition.IO in that you can manage various student loans from one dashboard. You can also review repayment options and research ways to potentially save money through refinancing your student loan.
SoFi.com – SoFi provides a fresh new approach to student loan refinancing with its marketplace that connects investors with borrowers in a peer-to-peer lending network. The main benefit of this type of service is that the competitive interest rates are in many cases lower than average private student loan interest rates and they provide other features such as job search assistance and support for entrepreneurs.
Credible — This free service provides a platform for borrowers to search for offers from a variety of different lenders (including SoFi) to refinance student loans. It also compares your situation to peers to see if you could be better off with a different loan option.
Estimate your current payoff plan. Determine how long it will take to be student loan debt-free (and the total cost of debt). After organizing and possibly refinancing your various student loans, you are in a position to use a student loan calculator to see when you will be debt-free. If you continue to make the minimum required payments, this figure is much easier to calculate since it will be based primarily on your original loan payoff date. However, many people are motivated by the desire to reduce the cost of borrowing and want to see how extra payments help them in the long run.
Repayment Estimator — This tool enables you to estimate federal student loan payments under various repayment plans (standard, graduated, pay as you earn, income-based, income-contingent, etc.).
Debt Blaster calculator — See how extra payments can fast track the loan payoff process.
Identify ways to free up extra money to fast track your debt payoff. Online budgeting tools such as Mint and Personal Capital can help you monitor and track your spending while setting limits in advance. This process will enable you to identify potential areas to cut back spending or free up extra dollars that may then be applied to your highest interest debt (or the loan with the lowest balance if you want a quick win).
Bottom line: Student loan payments do not have to be a constant burden. Whether you are already overwhelmed by your student loans or simply want to reach a state of financial freedom a little faster, there are a variety of repayment options that can save you significant money. The most important thing is to make sure your debt repayment plan fits into your total financial plan and meets your short and long-term objectives. For more information on student loan options visit FinAid.org.