Student loan debt recently surpassed the $1.5 trillion dollars in a measure1 released by the St. Louis Federal Reserve on August 8, 2018.  This amounts to a 144% increase in student loan debt over the past decade.  Pundits debate whether this is a crisis, and several political candidates2 have discussed policies to cancel student loan debts.  Crisis or not, juggling student loan payments while trying to begin your career and financial life is the reality for any young professionals.  Here are four tips to consider when paying back your student loans:

Prioritize your Student Loans payoff – While this seems obvious, this behavior and mindset will have the single biggest impact on your ability to pay off your loans.  If you have six figure loans from law school or medical school, you may have an income that will allow you to make larger payments to your loans that will eliminate this debt quickly.  You may have to defer larger purchases like vehicles or homes to allocate more of your income towards these payments.  If your current income does not allow you to make extra payments, consider a side gig to earn additional income each month and put that entirely to your student loan.  You can read some inspirational stories of people who have paid off their student loans here3 to get motivated.

Understand your repayment plan – If you qualify for Public Student Loan Forgiveness by working in the governmental or non-profit sector, you may be eligible for student loan forgiveness by making 120 qualifying payments.  For people who qualify for this program and intend to stay in this field for at least ten years, Public Student Loan Forgiveness programs can be the most cost-effective option.  If you don’t qualify for this program, Standard or Graduated repayment allows you to pay off your loans in 10 years and may be the best method of prepayment.  Extended payment plans that pay your loan in full over 25 years can give you budget relief as you get started but could force you to delay other life goals as you will carry your payments well into your 40s.

All income driven repayment plans allow you to reset your payment each year between 10% – 15% of your discretionary income.  If you make 20 years (25 for graduate loans) of qualifying and on-time payments under this plan, your loans will be forgiven.  Be aware, you may owe tax on any amount that is forgiven when that occurs.  While this plan seems attractive to those starting out, you may find yourself in a situation in which your payment isn’t covering the monthly interest, so your loans are growing in total value rather than decreasing.

Make extra payments to principal – You may have several different loans, with different balances, and interest rates due to the new loan distribution each time you began a new year or semester at school.  If you are making extra payments you will want to call your loan servicer and make your extra payment to your loan with the highest interest rate and make sure that your extra payment is going towards principal.  Most servicers allow you to do this online, but you may want to call and verify payments that are being applied correctly.

Avoid forbearance or deferment if possible – In forbearance or deferment, you can halt repayment of your loans and if you qualify for deferment, your Stafford loan’s interest will be paid by the federal government.  All other non-Stafford loans in deferment or forbearance will accrue interest that will be capitalized or added to your total loan balance.  If possible, you should try to make at least the interest payments to avoid this.  This can be particularly true for graduate degrees during internships or residencies as the loan balance can be large and interest can accrue quickly.

There are other strategies to help you pay off your student loans, but I highlight these four as I encountered each of them personally in my quest to pay off my undergraduate and graduate loans and hope others can learn from my experience.