Dealing With Debt: The Do’s and Don’ts of Paying Off Student Loans

One person's college fund, and one of the reasons student loans are often needed

One person’s college fund and one of the reasons student loans are often needed | iStock.com

Getting a handle on your student loans can be difficult. Depending on where you went to school, how long you were there, and what you studied, you might find yourself in a real pickle when it comes to paying for education. After four years, your student debt can top $100,000 — add in a graduate degree, and it can be substantially more. It’s a real issue that’s affecting the economy, and leaving millions of people with a feeling of complete hopelessness.

For a lot of borrowers, if they could do it all again, they’d make different choices. But for those who’ve already made their bed, so to speak, the only real course of action is to come to terms with it. And avoid making more mistakes in the future.

So, how can you dig yourself out of a significant debt related to your education? The first step is to grasp your situation, and lay it all out. See what you’re dealing with. And figure out a way to make the income you have (as little as it may be) work for you. As with anything related to personal finance, there are certain “dos” and “dont’s” when it comes to student loans.

And the more you know, the more effective your repayment strategy will become. Here are some do’s and don’ts for paying off your student loans.

Do: Make your payments

Making an online loan payment using a credit card

Making an online loan payment using a credit card | iStock.com

The first and absolute most important thing you need to do when dealing with debt? Make your payments. You won’t be doing yourself any favors by “forgetting,” or ignoring your balance. It’s not going to magically disappear. Your debts aren’t going anywhere — so make the payments. And know when you need to make your payments.

Don’t: Ignore your balances

As mentioned, don’t ignore your balances. You may have numerous loans from several lenders. Keep track of how much you owe, and who you owe it to. It can be tough to face debts that total into the six-figures, but for millions of people, it’s reality. To keep your head above water, keep your head in the game.

Do: Understand the terms

Paperwork with complex terminology litter a man's desk

Paperwork with complex terminology litter a man’s desk | iStock.com

Getting a handle on your student loans may mean doing some homework. You’re going to run into all kinds of unfamiliar terminology and financial jargon. Don’t let it scare you — learn what it all means, and equip yourself with the necessary knowledge. Not sure what the difference between deferment and default is? Clueless about how interest works, somehow?

Sit down and teach yourself.

Don’t: Keep your head in the sand

In the same way that you don’t want to ignore your balances, you don’t want to remain blithely ignorant as to what’s happening with your debt. Personal finance isn’t easy to grasp, and is one of the reasons so many people find themselves in trouble. Get your head out of the sand, do your homework, and get a clue as to what your situation actually looks like.

Do: Know your balance and due date

A couple add up the balances of their student loans

A couple adding up the balances of their student loans | iStock.com

We said it before: Don’t ignore your balances. If your loans are spread out across several lenders, you’ll need to keep track of when payments are due, and how much you need to pay, yourself. Learn to use Excel, or keep it all on a piece of paper somewhere. Don’t miss payments, and if you’re struggling, let lenders know.

Don’t: Expect loan forgiveness

You’ll hear a lot about “loan forgiveness” — but you should, in no way, expect that to happen. You’re on the hook, and you need to come to terms with it. Unless you feel you were scammed by a for-profit degree mill and are actively pursuing legal retribution, keep making your payments.

Do: Have a strategy

A couple stress while deploying a loan repayment strategy

A couple stress while deploying a loan repayment strategy | iStock.com

Strategize and plan. You may be facing an insurmountable debt, but if you can attack it with a sound strategy, you can save yourself tons of money. Not to mention shave years off of your repayment window. Sit down and take a look at your financial situation, or even meet with an adviser. There are strategies you can use to dig yourself out from student debt. Much more effective strategies than simply paying the minimum balance every month.

Don’t: Immediately consolidate or refinance

Loan consolidation and refinancing are options. But you don’t necessarily want to jump at them, simply because you can. In some situations, you might want to go for it. But there are downsides. You can lose perks, or get hit with fees, for example.

Do: Pay more than you have to

Man writing a payment cheque

Man writing a payment | iStock.com/Devrim_PINAR

Speaking of minimum payments — if you can pay more, go for it. You’ll whittle down your principal balance faster, and save money in the long run on interest. Not everyone is in a position to make extra payments, or apply more of their paycheck to their loan balance. But if you have the means? It’s definitely not a bad idea.

Don’t: Fake your own death

You may have heard that some borrowers have tried extreme tactics to escape debt. That includes faking their deaths. While brazen, it’s not advisable. You don’t want to give up your entire life, even if you do feel that you’ll never escape your situation. It’s going to catch up with you eventually.

Face the music, come to terms with your debt, and develop a strategy to take it on. It’s not fun, but unfortunately, you made a decision to take it on (even if it was ill-advised).

Follow Sam on Facebook and Twitter @SliceOfGinger

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