5 Ways to Help Manage Your Student Debt Load

Man with large block on back labeled "Student Loan" signifying onus of debt
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Content provided courtesy of USAA.

Student debt is a ticking time bomb that threatens to derail many young adults' financial futures.

 Outstanding student debt reached a record $1.16 trillion at the end of 2014, according to the Federal Reserve Bank of New York. That's more than the amount owed on all the credit cards in the country — or all the auto loans.

 Even more disturbing, more than one in 10 student loans is delinquent.

 Missing student-loan payments can make it difficult, if not impossible, to buy a car or home due to the impact on your credit score, and delinquency can make other debt more expensive. What's more, filing for bankruptcy usually doesn't wipe out student loans.

 These steps can help you better manage your student loans:

  • Prioritize your loan payments. Student debt isn't something you should ignore if you're having trouble making ends meet. Instead, build the payment into your monthly budget and cut back elsewhere — on that daily latte, for example. Missing payments hurts your credit rating and, because interest accrues, you'll end up owing even more.
  • Don't be afraid to seek help. Your loan provider may agree to ease the burden by reducing your monthly payments. Or it may let you defer making payments for a period of time to help you get back on your feet. But be aware, these steps will extend the life of the loan and you'll end up paying more in interest.
  • Take advantage of available programs. The federal Pay As You Earn (PAYE) program limits monthly payments to 10% of your discretionary income, a calculation based on your income in comparison to federal poverty guidelines. Those in public service, including the military, also can have their remaining balance forgiven if they've been making regular loan payments for 10 years and it still isn't paid off. If you're in the private sector, you can get balance forgiveness after 20 years. Note that the IRS treats the amount forgiven as taxable income, so you may be hit with a big tax bill at the end of the year. Get more information on PAYE and other repayment plans here.
  • Use military status to cut your rate. The Servicemembers Civil Relief Act (SCRA) caps the student loan interest rate of active service members at 6% if they incurred the debt before entering active duty. For information, visit this Defense Department SCRA page.
  • Consider consolidating. Combining several loans into one can save money while streamlining your bills. Contact your loan providers to ask about plans they offer. Be sure to understand your new payment schedule, interest rates and whether you'll have to pay any fees before signing.
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