7 things I wish someone explicitly told me before I started tackling my student loans (Please read if you're feeling overwhelmed)
Hey everyone. I know how suffocating it feels when you log into your portal and look at that massive number staring back at you. Navigating student debt is an absolute nightmare, and the system is intentionally confusing.
I’ve spent an unhealthy amount of time researching, doing the math, and figuring out how this game actually works. I wanted to share 7 golden rules I’ve learned along the way. Hopefully, this saves someone here a bit of money and a lot of anxiety.
1. Capitalized interest is the silent killer.
If you defer your loans or are on a payment plan that doesn't cover the monthly interest, that unpaid interest gets added to your principal balance. Then, you start paying interest ON the interest. This is how people pay for 10 years and owe more than they borrowed. Always try to at least pay the monthly interest as it accrues if you can.
2. Never, EVER pay a company for "student loan relief".
There are so many scammy companies out there that will charge you $500+ to "consolidate your loans" or enroll you in a forgiveness program. Everything they do, you can do for FREE at StudentAid.gov. If a company reaches out promising to magically wipe your debt for a fee, run.
3. Understand exactly what you lose if you refinance.
Refinancing federal loans with a private lender to get a lower interest rate sounds great on paper. BUT the moment you do that, you lose all federal protections. No more Income-Driven Repayment (IDR) plans, no more Public Service Loan Forgiveness (PSLF), and no more federal forbearance if you lose your job. Think very carefully before giving those up.
4. Specify that extra payments go to the PRINCIPAL.
If you manage to scrape together an extra $100 this month to throw at your loan, don't just hit "Make a Payment." Most servicers will just apply it to your next month's bill (advancing your due date). You have to manually select the option to apply the overpayment directly to your highest-interest principal balance.
5. The Avalanche Method mathematically beats the Snowball Method.
The Snowball method (paying off the smallest loans first for a psychological win) feels good. But the Avalanche method (putting all extra money toward the loan with the highest interest rate, regardless of the balance) is mathematically superior and will save you thousands of dollars and months of payments in the long run.
6. Recertify your income at the right time.
If you are on an IDR plan, your monthly payment is based on your income. If your income drops, or you lose your job, don't wait for your annual recertification! You can ask your servicer to recalculate your payment immediately based on your new, lower income.
7. You are more than your debt.
This is the most important one. It's so easy to let this define your 20s and 30s. Don't sacrifice your entire life, your mental health, or every single vacation just to pay it off faster. Make a plan, stick to the math, but remember to actually live your life. The debt will go away eventually, but you can't get your time back.
I really hope this helps someone today. You got this! Take a deep breath, do the math, and take it one month at a time.
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