How Do I Eliminate School Debt?

Eliminating school debt requires patience and determination.

Eliminating school debt requires patience and determination.

Student loans can be the single largest debt incurred by a young person. The size of these loans has traditionally been justified by the fact that an education is a ticket to a higher salary. Be that as it may, many graduates find themselves digging their way out of school debt for years, even decades, after they graduate. Knowing how to eliminate school debt, beginning before you graduate, can help you to get this necessary burden off of your back as quickly as possible.

Pay as much as you can on your college loans before the repayment period begins. Interest does not accrue on student loans while you are still in school. Take advantage of this opportunity by syphoning a bit of money here and there onto your loan balance. Use that big check from family members at Christmas, for example, to pay off a chunk of your loan, rather than spending it all on a new car.

Combine all outstanding loans into one by obtaining a Federal Direct Consolidation Loan online. Although you've likely received loan payouts in a single check, most college students actually receive loans from at least two sources and of two different types: subsidized and unsubsidized. Combining these loans through the Student Loan Marketing Association, also referred to as Sallie Mae, can allow you to make a single payment each month and get a clear overview of your total debt at any time. There are detailed instructions on applying for a consolidation loan online, as well as all the forms you'll need, online (see Resources).

File an Economic Hardship Deferment application with Sallie Mae. Recently-graduated debtors can file for an extension on the beginning date of their repayment term, rather than beginning payments six months after graduation, as per the loan agreement. Be aware, though, that interest continues to accrue during the extension period. It is best to make payments as often as you can during the deferment period; use the extension simply as a way to eliminate deadlines, not as a way to avoid paying altogether for another year.

Set aside a reasonable amount of your income each pay period for loan repayments. Consider saving a specific percentage to ensure that you can always afford to make student loan payments. For example, consider putting aside 10 percent of your income towards the debt. This can eliminate the “I'm broke” excuse for not making extra payments. No matter what you earn, you can afford to save around 10 percent. If you make $1,000 in a week, $100 is not too much to set aside. If you make $10 in a week, $1 is not too much.

Avoid consumer debt as much as possible. Credit cards can carry significantly higher interest rates than school loans, and they feature much more demanding repayment terms. Because of this, consumer debt can take priority over school loans, allowing the student loans to sit and accrue interest, possibly falling into default.

Warning

  • Student loans are a highly specialized type of loan that can cause lasting damage to your credit score if left unpaid. Always place priority on student loan payments to avoid falling into default.
 

About the Author

David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.

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