$1.4 trillion. That’s the amount of student loan debt currently crippling America’s millennial workforce. In fact, this generation is shouldering more student debt than any generation before them. It may come as no surprise, then, that the number of Americans severely behind on their federal student loan payments reached roughly 4.6 million in 2017—a doubling of the number from four years ago, despite a historically long stretch of job creation and economic growth.
OK, those are some big numbers. But if you're one of the 4.6 million Americans whose student loan debt is keeping you from getting some precious shut-eye, don't sweat things just yet. Even if you’re admittedly clueless about the status of your loan payments, there are a few simple things you can do to at least give yourself a reality check. And you know what? The reality might not be as bad as you think.
#1: Figure out when your repayment date is
Let's start with what is potentially the best part of this entire exercise: the light at the end of the tunnel. A common repayment plan that many borrowers choose is the standard repayment plan of 120 months (or 10 years). Although it may seem a long way out, we promise that it'll be here before you know it. For instance, a 22-year-old college graduate will be fully free of student loans by the time he or she is 32 (they do say that your 20s fly by...). In any case, you can calculate your own repayment on the U.S. Department of Education’s website.
#2: Make sure you’re not treading water
You might be in for a bit of a shock when you see the outstanding principal you owe on one or more of your loans. But did you know that, depending on your interest rate, a good chunk of your monthly payment could be going towards paying down the interest on the loan rather than the original loan balance? If that’s the case, you might consider refinancing (more on this in a second), or speaking to someone at your loan servicer(s) about alternative plans. Keep in mind, though, that the IRS allows you to write off a substantial portion of the student loan interest paid every year—so at least it’s not a total loss. However, if you’re treading water and making little progress toward fully repaying your loan(s), you'll want to figure out a better plan.
#3: Know what 'refinancing' really means
Refinancing student loans is such a popular concept, it was incorporated into multiple candidates' platforms during the 2016 presidential primaries. If you’re unfamiliar with how debt refinancing works, it’s pretty simple: In exchange for a lower interest rate, you essentially start the term of your loan over again. But while your monthly payment can be lowered significantly, you may end up paying more over time. If you’re just starting out—maybe a year or two into your repayment plan—then refinancing could prove to be a good option for you. It may take you a few more years to pay off your loan(s), but if that means extra cash going into your pocket in the meantime, it could end up being better for your overall finances (you could also pay more on your principal, but we’ll get to that in a moment). On the other hand, if you’ve already been paying off your loan(s) for several years, then refinancing might be a very bad idea (you’ll just end up paying longer than you need to). Plus, if you’re a public employee, you'll also reset the clock on any potential public service loan forgiveness.
#4: Pay a little more now to pay way less later
Speaking of pockets, put this tip in your back one: You can pay as little as $20 more a month on your payment, and end up wiping out one or more of your loans years early. So how about kicking your Starbucks Frappucino habit, and rewarding your future self with a little extra dough? It’s something to consider, or at least try to make happen. Every little bit counts.
Do you still feel overwhelmed by your loans? What would you do with your student loan payment if you didn’t have to fork it over every month? Leave your thoughts in comments.