A few months ago, SUM180 members Sarah and Schnelle raised the same question: What’s the best way for a recent graduate to pay off massive student debt? Since I know this challenge is shared by many others in our community, I’d like to share my advice for Sarah and Schnelle here.
First of all, if you’re carrying a large amount of student debt, you should know that you’re in good company. These days, believe it or not, there is more student loan debt than credit card debt in our country!
To pay off your student loans faster and more cost-efficiently, refinancing your loans is one of the best options. When you refinance your student loans, you’ll have one consolidated loan with a single monthly payment and a lower interest rate, which is important so that more of each payment goes towards paying down the balanced owed. Companies like SocialFinance (SoFi) have a strong refinancing offering. For more ideas, we also like Student Loan Hero’s The Ultimate Guide to Paying Off Student Loans Faster.
A few more tips from SUM180’s Nancy DeFauw:
- If you decide to go ahead, the first step is to find a reputable bank you’re comfortable working with and see what they can offer (ask friends and family for banks they do business with).
- If you’re interested in paying off your student debt off faster, it’s smart to compare interest rates to see if you can lower yours. Just remember, extending the term, while it lowers your payments, will result in you paying more interest over time.
- Be sure to steer clear of companies charging high upfront fees to help you consolidate your student loans or claim to be “approved” or “exclusive” servicers to special programs.”
(Read more from Nancy about federal vs private student loans here.)
Are you or someone in your family tackling student loan debt? What strategies are working for you?
Are you recommending that everyone refinance their student debt? My son has one loan through Nelnet. The balance is about $26,000. The interest rate is 4%. It seems like a good rate. Any thoughts about this specific loan?
You’re right, Suzanne. That’s about as good a deal as there is out there. He should crank away on the repayment, but also be sure he is making a regular contribution to his retirement accounts. That balanced approach of saving and paying down debt works best for most people. Let us know how it’s going?