When you have a federal student loan with a minimum of a 10 year payment plan, all unexpected events form layoffs to a higher-than-normal electric bill are more stressful. But they have more payment break options and repayment plan options than pretty much any other loan. Try these seven steps to reduce your student loan stress all year long.
1. Don’t overspend on gifts for friends
There isn’t a magic number of how much to spend on a friend or family member’s birthday present. But you should stick to a limit that fits in with your budget. For instance, you may add up prices of gifts your family and friends in their letters to Santa, but you didn’t ask for a credit card bill in yours. Look within your budget for what extra cash you do have or unnecessary spending you can cut. Try comparing car insurance rates. If you can save $600 per year, that’s $300 for presents and $300 to reduce your student loan debt.
2. Use Upromise for online shopping
If you’re going to shop online, get a percentage back that you can use towards repaying your student loans. Simply open a freeupromise account and search for items you want to buy. Then click on the link for the store that sells it. The bonus? You can also find coupons and save money on your purchases. For instance, if you spent $200 at Brookstone on holiday gifts, you’d earn $10. This may not seem like much, but over the course of ten years you may save yourself a student loan payment. Plus, you could use a coupon for $5 off your purchase and free shipping.
3. Don’t give yourself the gift of student loan defaults
It’s even better to misplace your car keys than your federal student loan payment information. When I consolidated mine I forgot to consolidate one. Years later when I returned to school, I couldn’t qualify for federal student aid because that loan defaulted. I set up a payment plan based on what I could afford and was back to school the following summer. As a bonus, my credit score jumped when the default was removed. You can avoid this situation by looking at the status of all your student loans on the National Student Loan Data System. If you see a default, arrange payments. If you don’t, you’ll find out if there are any loans that are considered delinquent. Delinquent loans still qualify for consolidation, payment breaks or a repayment plan change.
4. Take payment breaks when you need them
Don’t take payment breaks because you’d rather spend money on holiday presents. Do take payment breaks if your only other option is default. Federal student loans have more payment break options than nearly any other loan. So it never makes senses to mess up your credit simply because you didn’t request a temporary payment reprieve. Discuss all your options with your loan servicer, but always request deferment before forbearance. In periods of deferment, the government pays interest on subsidized student loans.
5. Look in your IRS couch cushions
Don’t dig through your couch cushions for change. Ask the IRS. Didn’t declare the $2,500 American Opportunity Credit you qualified for last year or the year prior? No problem. Amend your taxes and get a big check. Amending returns is easy with tax software because all the information from your original return is saved. When you have questions you call the IRS tax help line: 800-829-1040. Need the money year round that you receive back from student loan deduction? Change your tax withholding allowance to increase your paycheck.
6. Choose a repayment plan that you can afford
Does your budget feel tighter than your belt does after a family dinner? Loosen it up by changing federal student loan repayment plans. No one wants to extend their 10 year repayment to 25 to 30 years, but the lower payment can reduce amount you need to charge on credit cards to meet monthly obligation. Plus, you can always add money when you can. Income-based payments adjust based on your income and have maximum payoff terms between 20 and 25 years.
7. Realize your loans won’t be paid off tomorrow
No one enjoys paying off student loans for 30 years. However, trying to pay them off in 5 or 10 years when you can’t afford it could cause failure to stock an emergency account. Then what happens to your rent if you lose your job? Student loan debt is something you have to budget for and live with. If you want to pay it off early, do it in the low stress ways mentioned above.
Reyna Gobel, frequently quoted as an expert on student loans and college costs, is the author of “Graduation Debt: How To Manage Student Loans And Live Your Life” and “How Smart Students Pay for School: The Best Way to Save for College, Get the Right Loans, and Repay Debt.” She has appeared on PBS’s Nightly Business Report and speaks regularly at CollegeWeekLive. She teaches How to Repay Federal Student Loans on Udemy.