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7 strategies for managing student loan debt

For millions of Americans, student loans are a critical piece to solve the higher education financing puzzle. But upon graduation, many borrowers are faced with a new dilemma: How can they strategically manage their debt and balance student loan repayment with other financial priorities, such as saving for a home down payment or retirement?

If you have student loans, an Ameriprise financial advisor will create a personalized approach to help pay down debt in an efficient manner. Here are seven strategies to discuss if paying off student debt is a priority for you:

In this article:

  1. Pay more than what's due each month
  2. Pay biweekly instead of monthly
  3. Reduce your interest rate by signing up for autopay
  4. Consider refinancing or consolidating loans
  5. If you have multiple student loans, consider this effective debt payoff strategy
  6. Ask your employer about loan repayment assistance
  7. Know your government program options for repaying federal loans

1. Pay more than what's due each month

Consider paying above the amount due each month to pay off your loan faster and reduce the total amount of interest you’ll pay. Even a little can make a big difference.

For example, paying $50 extra a month on a $25,000 student loan allows you to retire the loan two years early, while also saving more than $1,500 in interest.1 To see how extra payments could affect your loan payoff schedule, check out our enhanced loan calculator.

When making extra payments, inform your loan servicer that the money should be applied to your principal balance. Otherwise, the servicer may apply the extra amount to your next month’s payment, which would simply advance your due date instead of reducing the principal.

2. Pay biweekly instead of monthly

By making biweekly payments, you’ll pay half your monthly bill every two weeks instead of making one full monthly payment. This means you’ll make an extra payment each year, reducing your repayment timeline and the amount of interest you’ll pay. With a standard 10-year repayment plan for a federal loan, this strategy allows you to pay off the loan a year early. 

3. Reduce your interest rate by signing up for autopay

Federal student loan servicers offer a quarter-point interest rate discount if you sign up to deduct loan payments from your bank account automatically. Many private lenders also offer an auto-pay deduction. In both cases, signing up for autopay is a simple way to reduce the interest rate on your loans, while ensuring you don’t accidentally miss any payments.

4. Consider refinancing or consolidating loans

With this strategy, you replace multiple student loans with a single private loan, ideally at a lower interest rate or shorter repayment term. If you have several loans, this can streamline your debt management and help you pay off the loans faster, but there are several considerations: 

  • Your monthly payment may increase, if you opt for a shorter loan term to pay down the principal faster and save money on interest.
  • Refinancing is not typically an option if you’re a recent graduate, as refinancing lenders prefer an applicant to have an established credit history and several years of steady employment. 
  • Refinancing federal loans may make you ineligible to take advantage of certain benefits, including student loan forgiveness and income-driven repayment plans. 

Before refinancing, shop around with a few lenders to find the best rates and use Ameriprise’s enhanced loan calculator to compare the possible scenarios. 

5. If you have multiple student loans, consider this effective debt payoff strategy

If you have more than one student loan and are unable to consolidate them, consider using the debt avalanche method to efficiently tackle your debts.

With this method, you make the minimum payments on all your loans and then direct any remaining money each month toward the loans with the highest interest rate. Once that loan is paid off, the extra repayment funds go toward the next-highest interest-bearing loan until that debt is paid off, and so on until all your student debts are gone. 

The debt avalanche method reduces the amount of interest you pay in the long term and the amount of time it takes you to get out of debt.

6. Ask your employer about loan repayment assistance 

Employers can currently provide up to $5,250 in student loan repayment annually as a tax-free benefit for employees, so it may be worthwhile to ask your company if they offer any repayment assistance — or are planning to in the future. 

Here are a few other employer benefits to explore:

  • Signing bonus or annual bonus: An employee could potentially put this lump-sum payment toward student loan debt. 
  • Unused vacation time: Some employers allow employees to apply the value of their unused paid time off to their student loans rather than carrying the time over from year to year. 
  • New SECURE Act 2.0 provision: Starting in 2024, employers will be able to match student loan payments as if they were payments to a qualified retirement plan, even if the employee doesn’t contribute to the company’s retirement plan. 

7. Know your government program options for repaying federal loans

If you meet the criteria, some borrowers with federal loans may be eligible for student loan forgiveness programs or other debt management plans.

  • Public Service Loan Forgiveness Program: If you work in a public service job for the government or a nonprofit organization, you may be eligible for the Public Service Loan Forgiveness Program. To have debt forgiven under this program, you must first make 10 years of qualifying payments. 
  • Career-specific and military programs: Veterans, active-duty military personnel, teachers, doctors and nurses may also be eligible for federal or state programs specifically designed to help manage or forgive their student loans. 
  • Income-driven payment plans: If your federal student loan payments are high in comparison to your income, you could consider an income-driven repayment plan. Under this program, your monthly student loan payment will be set at an amount that is projected to be affordable based on your income and family. This program also provides loan forgiveness after a set period of qualifying payments, usually 20 or 25 years.

You can find specific details on the above programs at the U.S. Department of Education’s website.

Which strategies for student loan repayment are right for my situation? How much more should I contribute toward my student loans to pay them off faster? I am close to paying off my student loans – where should I redirect the money that’s now going toward that debt to help save for other goals?

When you’re ready to reach out to an Ameriprise financial advisor for a complementary consultation, consider bringing these questions to your meeting.

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Let’s create a personalized student loan management strategy for you

If paying off student loans is a priority, an Ameriprise financial advisor can help build an effective strategy to manage those debts — and help you decide how to reallocate your money once you’ve paid off your loans.

Our financial advisors are here to support your financial goals.

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At Ameriprise, the financial advice we give each of our clients is personalized, based on your goals and no one else's. 

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1 Assumes an interest rate of 5.8% (the national average for all student loans) and an original loan term of 120 months, the standard for most student loans. 
The initial consultation provides an overview of financial planning concepts. You will not receive written analysis and/or recommendations.
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