Following a three-year hiatus brought on by the Supreme Court’s decision to overturn President Joe Biden’s forgiveness program in June, millions of borrowers will resume making their student loan payments in October 2023.
According to the Education Data Initiative, the total amount of student loan debt, which is currently $1.76 trillion, is increasing as many borrowers lack access to debt relief options. Additionally, 47.9 million borrowers have student loan debt.
While repaying student debt can be difficult, particularly if it exceeds $100,000, there are steps borrowers can take to reduce stress and repay it more quickly.
According to Joe Camberato, CEO of National Business Capital, you should begin by thoroughly assessing your financial situation.
“Take stock of all your income sources, expenses, and their timing to understand your cash flow,” he went on to say. “Document these details so that you have a clear reference point for your financial planning moving forward.”
Camberato went on to say that “while it is tempting to seek quick fixes or shortcuts, it is preferable to adopt a patient and diligent approach to loan repayment. Remember that you made a commitment to repay your loan, and honoring that commitment is a valuable lesson in financial responsibility that can positively shape your future financial decisions.”
Here are some steps to take when your student debt reaches $100,000, according to experts.
Living Below Your Means While Keeping a Job
According to Dror Liebenthal, CEO and co-founder of scholarship platform Bold.org, the first step is to ensure that you are working, even if only part-time, while still in school.
“$100k is a lot to pay off, and you’ll need to make sure you always have a stream of income to cover your monthly loan payments,” he told me.
Liebenthal also advised people to “live minimally.” He meant, “You need your expenses to be less than your income so that you can pay off your loans as quickly as possible.” To minimize loan interest, keep expenses as low as possible.
Create a strict budget.
One of the first steps toward paying off student loans faster is to create a budget that prioritizes your debt repayment goals.
Erika Kullberg, attorney, personal finance expert, and founder of Erika.com, stated, “To begin, you should include only your minimum monthly required payments as a fixed expense in your budget, as well as set aside some extra money to contribute to the principal balance.
“Every month that you pay off more principal than is required, the less interest you will pay in the long run and the easier it will be to pay off your loan ahead of schedule — while saving money,” she said.
Kullberg also emphasized the importance of telling your lender to apply any additional payments to your principal balance rather than interest, “to ensure your money is helping you pay off your balance.”
Be proactive and increase your payments.
In addition to a budget, Camberato emphasized the importance of taking an active repayment approach. Instead of relying on automatic payments, he suggests actively managing your repayment process.
“Regularly assess your financial situation to identify opportunities to increase your repayment amounts,” Camberato said. “By being proactive, you can minimize the duration of your debt.”
And, as Liebenthal mentioned, you should try to increase your monthly payments.
“Paying the minimum payment means you’ll be paying off that $100k for an awfully long time — and paying a considerable sum of interest over the course of the loan,” he added.
Some experts, including Natalie Daniels, regional director of the AccessLex Center for Education and Financial Capability, recommend trying one of the two most popular repayment methods.
If you can make accelerated payments and work directly with your servicer on your plan, you can use the debt avalanche method, which directs extra funds to the loan with the highest interest rate, or the debt snowball method, which directs extra funds to the loan with the smallest balance first.
Ask Your Employer About the CARES Act.
Patricia Roberts, COO of Gift of College, advised that, in addition to exploring all available options for cancellatioforgiveness,ess, and/or reduced payments, check to see if your current employ—o— or a prospective o—w— would be willing to help.
“Thanks to a provision in the CARES Act, employers have the opportunity to make student loan payments of up to $5,250 per year per employee—tthrough 1/1/2026 unless extended—aand for these payments to be tax-free to the employee,” the spokesperson said.
“What’s great from employers’ perspective is that they can differentiate themselves by offering a benefit like this and can also take a business tax deduction for these payments.”
Consolidate your loans.
Another option to consider is the consolidation and/or refinancing of multiple loans.
According to Todd Stearn, CEO and founder of The Money Manual, in addition to simplifying the repayment process, this can lower your interest rate and monthly payments and, in the case of federal loans, provide access to federal forgiveness programs.
“Take steps to improve your credit before applying, and recruit a co-signer with good credit if needed to ensure the best possible rate,” he went on to say.
Other experts agreed that this can result in significant savings over the life of your loan.
“However, be aware that if you’re refinancing a federal student loan into a private student loan, you can lose the additional borrower protections that come with federal loans,” Liebenthal, who writes for Bold.org, said.
Review your repayment options.
Another important step is to ensure that you are on the proper repayment plan. According to Daniels of the AccessLex Center, borrowers who have federal student loans frequently choose the 10-year Standard repayment plan to pay down their debt quickly.
“However, the 10-year Standard monthly payment on 100k would probably result in a minimum monthly payment over $1,100, with the exact amount depending on the interest rate of your loans,” Daniels went on to say. “But, if the 10-year Standard repayment plan doesn’t fit within your budget, consider an income-driven repayment plan.”
The new Saving on a Valuable Education (SAVE) repayment plan, based on income, household size, and state of residence, can lower monthly payments compared to other income-driven repayment plans by focusing on a smaller portion of adjusted gross income.
“It also offers an interest subsidy so that any unpaid interest that isn’t covered by your monthly payment is covered by the government,” he said.