How to Manage Student Loan Debt: Tips for Tackling Payments

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In an ideal world, the best way to manage your student loan debt would be to not have any in the first place. But we live in reality. Nursing school programs can be very expensive, and student loans are sometimes the most effective way to leverage debt for a big income-earning potential. 

It’s understood that student loans are a lot to think about, and there’s a lot to consider before signing on the dotted line. But how can you best manage your debt once your loans have already been disbursed? 

Bri Love FNP-BC, a travel nurse passionate about financial literacy, encourages her followers and fellow nurses to learn more about their own student loans. She recommends that nurses know exactly how much they’re paying in interest every month. It’s not enough to just know what the interest rate is but to specifically know the dollar amount.

Love says, “It’s important to know how much interest you are accruing every month and how much of your payment is actually going towards your debt.” 

In partnership with Love, we laid out some easy steps to help you tackle your student loan debt. 

Know Your Student Loan Debt Stats

You can’t tackle your student loan debt if you don’t know exactly what you owe. Make a list of all your loans (federal and private) and include the following information:

• Total loan amount
• Interest rate
• Fixed or variable
• Monthly payment and term
• Payoff date if you pay only the minimum

Love suggests listing these by how much interest you pay in dollar amounts rather than percentages. You can also make the largest overall payment or the smallest to biggest balance. It depends on how you want to prioritize your payoff.

Make Payments Automatic

When managing your federal loans, there are lots of repayment options. You need to research which fits your specific situation best. The Department of Education is a great resource with tools available to help you review all your options and choose what makes sense for you. There’s also a debt simulator to model different repayment plans. Set up autopay once you decide on a student loan repayment plan and have your payment debited monthly. The benefits of automating your student loan payments include:

• Avoiding missed payments: Autopayments help ensure you make your payments on time each month to avoid penalties or defaulting on your student loans.
• Eliminating an inconvenient task: Not having to remember to manually submit a payment every month saves you time, effort and stress.
• Budgeting becomes easier: Setting up payments to automatically deduct from your bank account each month helps you incorporate your student loans into your monthly budget.
• Staying on track: Consistently making your student loan payments through autopay keeps you on track to becoming free of your student loan debt.
• Saving interest: Setting up automatic payments could earn you an interest rate discount, saving you money over the life of your student loan.

Besides potential interest savings, automatic payments also help you consistently make your payment on time. For private loans, making a certain number of payments on time could net you another discount. Set up your online access, and make your payments automatic so you never miss one and capitalize on available discounts. 

Reap the Rewards of Extra Payments

Paying a few extra dollars a month towards the principal (the amount you initially borrowed) can make a huge difference in the end. You could pay off your loans years early if you pay as little as $25 extra every month. Paying extra also reduces your interest. Since interest is usually calculated based on the remaining principal balance, paying down your principal reduces the amount on which the interest accrues, thus lowering the amount of interest owed.

An unintentional perk of paying extra on your student loans is having a positive impact on your credit score. According to TransUnion, student loans are a type of installment loan and appear on your credit report just like other installment loans. Thus, they can impact your credit score.

While consistently making on-time payments can help improve your credit by demonstrating responsible debt management. Payment history is the most influential factor in determining your score. Conversely, making payments late or missing payments altogether can have a negative impact on your credit score.

The amount of debt you owe also influences your credit score, so high student loan balances relative to your available credit can negatively impact your score. Paying down your principal sooner by making extra payments helps improve your overall credit utilization ratio, which can help improve your score.

Beware of loan servicers and banks that try to force you to pay next month’s interest before you can pay down the principal. You’re basically paying the bank in advance before lowering your loan balance. You should always have the option to pay additional money toward your principal balance. This is the only way to pay off your debt early. 

Explore Your Options

There’s more than one way to tackle your student loans, but not all of them work for everyone. It’s essential to explore all your options to see if something you missed could help you on your journey to becoming free of your student loan debt. If you haven’t already, consider the following options:

• Check out debt forgiveness: While this can be a great way to get your student loans forgiven, debt forgiveness programs are notoriously difficult to qualify for and often have extremely rigid terms, but you should really take advantage if you can. Read all the fine print and do your research. Loan forgiveness programs should be used in a work situation that already aligns with your goals, not you changing your goals for the potential of loan forgiveness. 
• Consider taking on a side hustle: Working on a side job isn’t feasible or ideal for everyone’s situation, but if you have the time to work a few extra hours a week, use the additional proceeds to pay down your loans faster. Or take Love’s advice and look for higher-paying jobs with better pay and financial benefits, such as 401ks or tuition reimbursement, to help you achieve your goals without needing a side hustle.
• Sneak in an extra payment: Making biweekly payments instead of monthly payments lets you sneak in an extra payment each year. When you pay biweekly, you make 26 half payments, the equivalent of 13 full payments, or one additional payment annually.
• Prioritize high-interest loans: Many healthcare professionals have multiple student loans and some are bound to have higher interest than others. Prioritize paying off the ones with the highest interest first to eliminate the amount of interest that accumulates over time, saving you money in the long run.
• Cut unnecessary expenses: Look for ways to live more frugally, such as skipping expensive coffees or dinners out and using the money you save to put towards your student loans. A little sacrifice now could save you a lot over time and get you out of debt and able to enjoy those pricey goodies before you know it.

Another option is to consolidate, but consolidate conservatively! Love cautions against consolidating all your federal loans into one large private loan. Once all your loans are private, you lose the ability to qualify for federal programs, such as the pause on minimum payments and interest for federally held loans that took place during the COVID-19 pandemic.

The student loan forbearance was initially enacted in March 2020 as part of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) and was extended several times over multiple years. During this time, borrowers of qualifying federal student loans didn’t have to make their minimum payments and interest was set to zero, so additional interest wouldn’t accrue during the forbearance period.

Have a Solid Strategy

Love’s final piece of advice is, “You need to have a strategy. Always have a strategy.”

Even if your strategy is to pay the minimum, on time, for each loan, you’re taking positive steps towards managing and paying off your student loans. Stay on top of your repayment, and you’ll be debt-free before you know it.

Find a high-paying allied health or nursing job on Vivian Health and get out of debt quicker with the additional income.