6 Signs You Need a Better Plan To Pay Off Your Student Loans

Angela Mae
Liubomyr Vorona / iStock.com
Liubomyr Vorona / iStock.com

The total amount of student loan debt in the U.S. is $1.727 trillion, according to Education Data Initiative. This includes private and federal loans, but the bulk of this debt is from federal loans alone. The average borrower owes $37,088 in federal student loans and nearly $40,000 when you account for private loans.

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In any given year, around 4 million student loans are in default. This means the borrower fell behind on payments long enough for the lender to send them to a collections agency whose purpose is to try to collect payment.

If you’re struggling with student loans, you’re not alone. Here are six key signs you need a better plan to pay them off, the challenges of you may encounter, and some helpful options to explore.

Your Principal Barely Moves

“If the loan principal barely moves, that’s your cue to act,” said Rhett Stubbendeck, CEO and founder of Leverage Planning.

With student loans comes interest. If you’re only paying the minimum amount due every month, you’re probably not making much of a dent in your loans. This means you’re basically just paying interest and not the principal balance. It also means you’re going to be holding onto that debt far beyond what you should.

You’re Struggling To Keep Up With Payments

“Individuals may need a better plan if they struggle to make consistent payments,” said Ryan Clark, an independent college counselor at Clark College Consulting.

If you’re struggling to make even the minimum monthly payment, you’re regularly missing payments or you’re falling behind, you must reevaluate your repayment plan. You should be able to make at least the full student loan payment every month.

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You’ve Put Other Goals on Hold

“Sacrificing other financial goals or essentials to keep up with student loan payments” is another sign that you need a better repayment plan, said Taylor Kovar, CFP, founder and CEO of 11 Financial.

It’s one thing to put your saving or investing goals on hold for a year or two while tackling your student loans or other debts. It’s another to put those goals on hold and never circle back to them.

You’re Simply Overwhelmed

Another sign that your current plan isn’t working? “[You’re] feeling overwhelmed by the total amount owed and [are] unsure of how to make progress,” said Kovar.

Perhaps you can’t make ends meet when it comes to your other bills and expenses. Or maybe you’re experiencing increased stress due to loan repayment. Whatever the case may be, if your student loans are overwhelming you, it’s time to make a change.

You Dread Making Payments

“If you’re always paying your student loan last, or if living costs are a squeeze post-payment, it’s a clear sign you need a new plan,” said Stubbendeck.

Paying off debt is never fun, but if you’re dreading every payment or putting it off until the last minute, it’s probably a sign that you need to change your repayment strategy.

You Regularly Use Credit Cards

Credit card usage could be a sign of other, underlying issues or poor money management. But it can just as easily indicate that your current repayment plan isn’t working for you.

If you’re relying on credit cards to cover loan payments, it’s often a sign that you need a more structured, more manageable repayment strategy, said Clark.

Why Student Loans Are So Difficult To Repay

“Student loans can be so hard to pay off simply because they can be so large. College is only getting exponentially more expensive, so many students are taking out tens if not hundreds of [thousands of] dollars in student loans simply to be able to afford an education,” said Carter Seuthe, CEO of Credit Summit Debt Consolidation.

And that’s not even accounting for interest charges, the cost of living, and your earnings potential right out of college — and even beyond.

“Combine that with high interest rates and the likelihood of not getting a super high-paying job for a while after college (and having a high cost of living) and that doesn’t leave a lot of wiggle room for grads to be able to pay their student loans off efficiently,” continued Seuthe.

Besides that, student loans often have complex terms and repayment plans. If you don’t fully understand the fine print, it can be harder to get ahead and pay off the debt quickly.

You Have Options

If you’re trying to find a better way to deal with your student loans, here are a few options to consider:

  • Income-driven repayment plans: If you’re in a transition period or aren’t making enough to manage your current student loan payment, see if you qualify for an income-driven repayment plan instead. This won’t help you pay off the debt sooner, but it can make it more manageable while you find other ways to improve your financial situation.

  • Student loan forgiveness: If you have federal student loans, you may be eligible for student loan forgiveness. You may qualify if you’re a teacher or a medical professional, work for a nonprofit or government agency, or have a disability. You could also get some or all of your loans cancelled if your school has closed. Review your options and the requirements thoroughly.

  • Deferment or forbearance: These options let you temporarily delay repayment, usually due to a qualifying disability or proven financial hardship. With forbearance, your loans will still incur interest, so keep this in mind. Neither option will get rid of your debts, but they can provide short-term relief.

  • Employer assistance: “Check if your workplace offers student loan repayment benefits,” said Stubbendeck. “It’s becoming more common and can significantly reduce your debt.”

  • Debt refinance or consolidation: “Refinancing or consolidating loans may also be options to lower interest rates and simplify repayment,” said Kovar. Doing this might make any federal loans ineligible for forgiveness or cancelation, however.

  • Aggressive repayment: Create a detailed budget that tracks all of your income and expenses. Then, cut back on everything you can and put that extra money toward your student loans to pay them off sooner.

“Don’t hesitate to reach out to loan servicers, financial aid offices, or reputable financial professionals for guidance and support,” said Kovar. “They can provide information on available resources, repayment options, and strategies to manage your student loan debt effectively.”

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This article originally appeared on GOBankingRates.com: 6 Signs You Need a Better Plan To Pay Off Your Student Loans

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