Tackle Your Student Loan Balance with These 9 Repayment Tips

After years of back and forth on student loan forgiveness, millions of borrowers have already started or are preparing to start their payments back up. It’s a crucial time to be doing so, as delinquent student loans will now show up on borrowers’ credit reports. Approximately 9.2 million borrowers—43% of those with payments due—are behind.¹ If you’re still looking at a sizeable student loan balance yourself, it’s important to be proactive. Use this guide to find answers to your questions as well as tips and methods to chip away at your debt.

How do I apply for student loan forgiveness? 

Broad student loan forgiveness programs are no longer available, but there are still pathways for borrowers to seek relief. Income-driven repayment (IDR) plans remain a viable option for federal student loan borrowers. 

These plans calculate monthly payments based on a percentage of discretionary income and family size, often making repayment more manageable. Borrowers can apply for IDR plans through the Federal Student Aid website or their loan servicer by submitting income documentation and selecting the most suitable plan.

Additionally, certain borrowers may qualify for loan forgiveness or discharge under specific circumstances. Public Service Loan Forgiveness (PSLF) is available to those who work full-time for qualifying nonprofit organizations or government agencies and make 120 qualifying payments under an eligible repayment plan. 

Teachers, nurses, and other public service professionals may benefit from this program. Borrowers with a permanent disability can apply for a Total and Permanent Disability Discharge, while those whose schools closed or misled them may qualify for a Closed School Discharge or Borrower Defense to Repayment. Each program has unique eligibility requirements and application processes, so borrowers should carefully review their options and consult the Federal Student Aid website for detailed guidance.

Will student loans affect my credit score? 

Student loans can have a significant impact on your credit score, both positively and negatively, depending on how you manage them. Missing payments or failing to make them on time can harm your credit score, as it signals to lenders that you may struggle with financial responsibilities. 

On the other hand, paying student loans builds credit if you make on-time payments because you're demonstrating reliability and good financial habits. As you properly manage your loans over time, your credit history will also grow longer—a key factor in your credit score calculation. A solid credit history can make it easier to qualify for other types of credit in the future, such as a mortgage or car loan.

Will minimum student loan payments hurt my credit score?   

Making the minimum payment on your student loans will not hurt your credit score, as long as you make the payments on time. However, keep in mind that paying more than the minimum can reduce your debt faster and save money on interest in the long run.

9 tips for student loan debt payoff 

1. Create a budget

Before you start paying down your debts, it’s important to create a monthly budget to get a grasp on your financial situation.  First, take your monthly income after taxes and subtract monthly expenses, such as: rent, insurance, utilities, and groceries. Then evaluate your student loan debts so you know how much you owe in total. You can reference this budget to determine how much you can afford to pay toward debt each month. 

2. Pay off high-interest loans first

If you have several student loans, prioritize and pay off the loan with the highest interest rate first. The quicker you can pay down the higher rate loans, the less interest you will accumulate which will save you more money in the long run.

3. Make payments during the grace period

Many student loan lenders offer a “grace period,” which usually lasts six months from the time you graduate. During this time, you are not required to make student loan payments. The purpose behind the grace period is to give recent graduates time to find a secure paying job and to select a repayment plan. 

This grace period can vary based on the loan type, any military activity, or if you consolidated any of your loans. If you can begin making payments right way, you’ll be ahead of the game in the long run.

4. Consider submitting more than the minimum payment 

During your repayment period, you’ll be billed monthly, but in most cases, you can make larger payments than the amount due. By paying more than the amount due when possible, you’ll not only shorten your repayment period, but also the amount of money you’ll pay in interest. Because interest is compounded, even paying an additional $100 toward your monthly payment could save you hundreds down the road.

5. Split your bill into two monthly payments

If you have larger monthly payments, try breaking the payments into two payments instead. This can be helpful when managing your monthly budget, so you don’t spend money in other places. Plus, with bi-weekly payments you’ll end up making one extra payment a year, shaving months and years off your loan term.

6. Set up automatic payments

To avoid missed payments and stay on track with your repayment plan, consider setting up automatic payments. Some lenders even offer rebates or interest rate reduction options for setting up automatic payments.

7. Refinance if conditions are right

If you have a steady income with a good credit score, you could be eligible to refinance your student loans. When you refinance, you essentially take out a new loan and use the funds to pay off the old loan. Refinancing makes sense if you’re able to get a shorter-term length, a lower interest rate, or both. You may also want to consider consolidating your student loans when you refinance to combine multiple student loans into a new, single loan for convenience.

8. Check if your company offers repayment assistance

As an employee benefit, some employers help pay back their employees’ student loans. The amount compensated can vary, nonetheless, it’s still a great option to consider. Talk to your Human Resources department to see if your organization offers this perk.

9. Deduct student loan interest from your taxes

As you pay off your student loans, you’re also paying student loan interest. Take advantage of the Student Loan Interest Deduction on your federal tax return. You can deduct as much as $2,500 in total interest on federal and private student loans, which can greatly reduce your tax liability by several hundred dollars. Even better, use this money from your tax return to make an extra payment to your student loans!

When you develop your student loan payoff plan early on, you’ll set yourself up for success from the beginning. It may seem overwhelming but take it month by month and you’ll see the total amount you owe dwindle overtime and even shorten the time it takes to pay back.

Make debt payoff more affordable

One factor that can make student loan debt payoff more expensive and convoluted is having multiple loan servicers. Consolidating high-interest student loan debt into one low-rate personal loan at General Electric Credit Union will streamline the payoff process and make it less expensive in the long run. Schedule an appointment at a GECU location near you to talk through your options with a dedicated team member.