We are in the midst of a student loan debt crisis. College costs are increasing alongside a $1.3 billion in collective student loan debt. In early 2016, our Money Mindset of U.S. College Grads: 2016 Report found 73% of college seniors and juniors said they would be graduating with an average of $32,000 in student loan debt. It’s no wonder college education and student loan debt relief are one of the most important issues in the 2016 election.
We heard it throughout Bernie Sanders’ campaign, with promises of free student tuition for all. And we’re continuing to hear the push for student loan debt support by Hillary Clinton, who recently released a student loan forgiveness plan and Donald Trump has spoken out on student loans, but hasn’t released a detailed policy outline.
Needless to say, the 43 million borrowers across the country are perking up to hear how each candidate plans to make a dent in the student debt crisis.
With the overwhelming amount of debt graduates are shouldering on average, it can seem nearly impossible to keep up with payments. In 2014, The Federal Reserve Bank of New York Consumer Credit Panel conducted a study that showed nearly 20% of student loans were delinquent or defaulted (nine months past due). The study also showed that the number of borrowers who default each year increased from about 500,000 in 2002 to 1.2 million annually in 2011 and 2012. Although the number of borrowers who default each year peaked in 2012, there’s no arguing — this is still a major problem for several Americans.
Although we can’t fix the problem right away, there are things you can do today to climb out of student loan debt. Here are eight hacks to student loan debt relief:
1. Setup automatic payments.
This one is a no-brainer. Most student loan agencies offer online services that make it easy to set up automatic payments. Your student loans are likely your biggest chunk of debt, so you want to be diligent about paying them down each month. Missing payments or paying late can hurt your credit and ruin your chances of any Federal program that offers loan forgiveness. Setting up automatic payments allows you to continue to make your payments regularly without having to worry about missing one or being late.
2. Take advantage of prepayments.
All student loans are prepayment penalty free. This means you can start paying them down right away and you won’t be charged for any additional amount. Most graduates may not even realize that interest is front-loaded and starts accruing immediately (yes, even while you’re in school). They often don’t realize it until they graduate and see the loan amount is much higher than they remember. So do what you can to pay off loans as soon as you’re able. A little extra contribution beyond the minimum monthly payment goes a long way.
You can use Chime’s automated savings account to use some of your weekly savings to pay down your student loans each week.
3. Consolidate and refinance your loans.
If you have older loans with variable interest rates, refinancing could be a good way of lessening your overall interest rate. Student loan refinancing has become more accessible to borrowers thanks to increased competition from private lenders such as SoFi and Earnest.
Private lenders may be able to save you thousands of dollars over the life of your loans, especially if you have good credit and income. According to data from Credible, an online marketplace for student loan refinancing, the average borrower can save almost $14,000 when they refinance. Keep in mind however that when you refinance through a private lenders, you won’t be eligible for some benefits provided by federal loans such as income-based repayment plans or public service loan forgiveness.
Even if you aren’t able to lower the interest rate, consolidating your loans so that you can make one payment as opposed to several a month can lessen your mental burden and help you stay on track.
4. Use your tax return to pay off a bigger chunk of debt.
The interest you pay on student loans is tax deductible. This means that when you file your taxes, you will likely get money back based on how much interest you paid in the previous year. It may be tempting to think of that as extra cash for spending. But using any tax refund toward your loan in the immediate term can have a bigger benefit to you in the long run. Don’t calculate it as a bonus or income. Just send it straight to your loan provider and pretend you never had it in your spendy little hands.
5. Negotiate loan payments in your compensation package.
Whether you’re applying for a new job or coming up on an annual review, consider asking your employer to include a lump sum payment or making monthly payments for student loan debt relief. This is becoming more popular with recent legislation, but for today, you may need to negotiate in lieu of additional salary or benefits.
6. Get a side gig to lessen debt faster.
Picking up a side job is more accessible than ever. Apps like Rover, TaskRabbit, Lyft and several others make it easy to pocket a little extra cash. The benefit of these jobs is that you can control the amount of time you want to dedicate each month, and it’s fairly easy work that can help you pay down student debt faster.
7. Pay while you’re in school.
If you’re still in school, there’s no time like the present to start paying off your student loans. Take on a part time job and dedicate your income to paying off your student loans ahead of schedule. Although it may be tempting to spend your income on beer and last minute game tickets, dedicate at least a portion of your income to getting a head start on your loan payments.
8. Work in public service? Your loans may be forgiven.
For those dedicated to a career in public service or non-profit work, you may be eligible for Public Service Loan Forgiveness. To qualify, you’ll have to work at least 30 hours a week within a government organization (at any level) or for a not-for-profit organization that is tax-exempt under Section 501(c)(3) for and make monthly qualifying payments for 10 years. After those 120 qualifying monthly payments,, your remaining federal student loan balance will be forgiven.
Bonus: If you have Perkins loans while working in public service, you may also benefit from the Federal Perkins Loan Forgiveness program.
Double Bonus: Plan on teaching for more than 15 years? You’re in luck. You may qualify for the public service loan forgiveness program in addition to teacher-specific forgiveness options. You can learn more about the program on the Federal Student Aid’s website.