4 Simple Ways to Reduce Student Loan Debt

4 Simple Ways to Lessen Student Loan Debt

Student loan debt is higher than it has ever been since lenders started giving out loans for college tuition. The 2016 class is the most indebted generation ever with student loans. According to Student Loan Hero, over 43 millions borrowers owe $1.3 trillion (yes, that’s a “T”) in outstanding student loans. That is just massive! They are non-dischargable in bankruptcy and they can take decades to repay. For some, the monthly repayment is equal to a car note or even rent on an apartment. Following are some tips to take the pressure off the wallet and get the loans paid off sooner than later.

Apply for Scholarships and Grants

There are thousands of grants and scholarships available to help reduce the student loan burden. Some are awarded to students in a specific discipline while others have a narrow set of requirements such as a grant for children of veterans, to qualify. Pell grants are awarded to students who demonstrate financial need. It’s possible to have more than one grant or scholarship for a given semester, and they don’t need repayment. Ultimately it means less money taken out in the form of a loan.

Why not take the time to find these scholarships and grants before you have to take out loans? It’s always better to reduce the amount you have to pay beforehand and not after. That’s all I’m saying.

Make Extra Payments

Putting more cash towards the loan every month may seem like a daunting proposition. But making the effort pays down the principal while reducing the amount of interest paid. Consider doing it monthly after the regular payment, or whenever there’s enough set aside.

If finding money is a problem, consider saving a few dollars here and there throughout the month (here are 43 ways to save money). The total amount you save won’t matter because the payment is sent in outside of the regular installment. Make sure to note that the money gets applied to the principal and not interest.

Be sure to check with the loan company to find out how they handle the extra payment. Some companies apply the extra payment to the next regular installment and won’t make it clear if the money has been applied to the principal. There’s also the potential that the lender uses the extra payments to satisfy fees and interest first. If there are multiple loans with the same lender, make sure that the lender credits the correct loan instead of applying it to another.

Related Read: 10 ways to earn money while in college

Find Ways to Save Money on Textbooks

Oftentimes, students get their loans and don’t think about how much they’re paying for their school needs. Textbooks are a prime example of a costly item that students use their loan money to buy. Don’t buy new books unless necessary. Instead, buy used or rent textbooks from places like Campus Books and other online book retailers when at all possible. Sometimes there’s no getting around the fact a teacher requires the latest edition, but the fewer new books purchased, the better.

There are some teachers that will allow people to share books depending on the situation. If you can get away with sharing a book with a classmate (maybe one who is also your roommate), then you can cut the costs by half. Just make sure to ask the teacher before you do it.

Utilize Income Based Repayments

Income Based Repayment, or IBR, is a program that is designed to let graduates pay back the loan based on their income. The graduate uses a formula to decide how much money is left over after all other bills are paid, and the monthly payment is adjusted based on the final number.

There is a catch to IBR, however. Loans get extended for a longer period which means more interest gets paid, further increasing the overall cost. But it’s an option for those who need some relief from their monthly installment payment.

Each student has a unique situation in terms of their ability to repay their loans. It takes careful planning and decision-making to decide the best way to reduce the debt load.

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About the Author Grayson Bell

I'm a business owner, blogger, father, and husband. I used credit cards too much and found myself in over $75,000 in debt ($50,000 in just credit cards). I paid it off, started this blog, and my financial life has changed. I now talk about fighting debt and growing wealth here. I run a WordPress support company, along with another blog, Eyes on the Dollar, which is another great personal finance blog.

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Leave a Comment:

Jayson @ Monster Piggy Bank says May 28

I was lucky because I did not have a student loan to deal with after graduation because I was granted a scholarship that covered full tuition and miscellaneous fees.

Linda says December 30

Great tips! Selling previous text books can indeed help you pay your debt. If you can also work part time or any online jobs, it can help!

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