A 6-Step Guide to Managing Your Student Loans

In this excerpt from Laura's new book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, you'll get solid tips to manage student loans wisely and use lesser-known strategies to make education debt much more affordable.

Laura Adams, MBA
7-minute read
Episode #568

The main difference is that unlike consolidating federal loans, the interest rate on your new private loan is not a weighted average of your old loan rates. A private lender will evaluate your current financial information and may give you a lower interest rate—which is actually a refinance.

Doing a refinance means that you pay off one or more of your high-interest loans with a new loan that has a lower interest rate. While the federal government offers consolidation, student loan refinancing is only available from private lenders.

Private lenders will evaluate your financial situation for approval. But if your finances and credit are better than when you first got your loan, you may be able to refinance at a lower interest rate, which would allow you to:

  • Lower your monthly payments 
  • Shorten your repayment time so you pay off the debt sooner 
  • Reduce the total amount of interest you must pay 
  • Choose a variable interest rate loan, which can be more affordable if you plan to pay off your loan relatively quickly
  • Enjoy the benefits of consolidation, including having one simplified monthly bill

When you have lower payments, you can pay more toward your principal balance each month, which pays down your loan faster and allows you to easily save money.

When you have lower payments, you can pay more toward your principal balance each month, which pays down your loan faster and allows you to easily save money.

There are private lenders that may refinance both federal and private student loans for as little as 2 percent or 3 percent with repayment terms ranging from five to 20 years. Every lender’s underwriting requirements for refinancing are different, so you need to shop and compare offers from several companies to make sure you get the best deal. If you’re not sure where to start, check out my Online Loan Comparison Chart for some of the best places to refinance your student loans.

Finaid.org has a list of federal and private student loan institutions, including lenders that specifically offer consolidation loans. You can also get a consolidation loan directly from the U.S. Department of Education at StudentLoans.gov.

If you have student loans that you want to whittle down faster, without doing a consolidation, there are several options. Here are six more ways to make your federal and private student loans more affordable.

  1. Make accelerated loan payments.
  2. Pay more than the minimum.
  3. Use windfalls to pay down debt.
  4. Explore loan forgiveness programs.
  5. Find out if your employer has student loan benefits.
  6. Automate your loan payments.

Here they are in more detail. 

1. Make accelerated loan payments.

A secret weapon you can use to whittle down your balances on student loans (or any type of loan) faster and pay less interest without paying an extra dime is to make accelerated or biweekly payments instead of monthly payments. This strategy works for all types of installment loans, if they don’t impose a prepayment penalty (which typically isn’t the case for student loans). 

Biweekly payments take advantage of the fact that one month out of each quarter has five weeks in it instead of four. There are 13 weeks in each quarter, not 12, and there are 52 weeks in a year, not 48. So it’s a sneaky way to get the equivalent of one extra monthly payment made each year.

The additional payment works wonders toward paying down a loan faster, which means you pay less interest over time. This strategy works especially well if you get paid every other week, so you can budget the biweekly loan payment to occur close to each payday.

2. Pay more than the minimum.

If you have extra money each month, you could pay more than the minimum payment. Let’s say you owe $50,000 at a 5 percent interest rate for 10 years. Your minimum payment would be $530 and cost you about $14,000 in interest over the life of the loan. But if you pay an additional $100 each month you’ll save about $3,000 in interest and pay off the loan two years earlier.

When you send more than the minimum payment or make biweekly payments, make sure that you add a note to your payment indicating that you want the extra to go toward your principal balance. Otherwise, the lender may think that you’re prepaying the next month’s payment and simply hold it, which won’t help you get rid of the debt any faster.


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.