How to Manage a Student Debt

Edited by Hannah Locklear

Summary: Budgeting, repayment plans, and extra payments can help you manage and reduce student loan debt effectively. When debt collectors come knocking, SoloSuit can help you respond effectively at any stage of the debt collection process.

Let's face it: college costs lots of money, and not every family can afford to sponsor their child's education. This is why most students graduate with some amount of debt.

Thankfully, there are ways to reduce that load quickly and effectively, from budgeting to loan consolidation, and the sooner you develop a plan to manage your own student debt, the better off you'll be. There are many ways to do this—from budgeting to repayment plans and loan forgiveness programs, so let's explore a few of them, shall we?

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Know your numbers

Student loan debt can feel overwhelming, but the more you know about your payments, your balances, and what you can do to manage them, the easier it becomes. Start by identifying your lenders, their contact information, and what you owe. Then, find out what kind of repayment plan you have.

You can also try using an online student loan calculator to compare options. You may find that you can reduce your interest rates or make smaller payments by changing your repayment plan. Alternatively, you can apply an effective payment strategy like the snowball or avalanche debt repayment method, which we will discuss later.

Getting on top of your student loans can give you more flexibility to make other financial decisions, like investing in retirement or buying a home in the future. And if you can afford it, adding to your monthly cash flow by working a side job as an essay helper or taking on a summer gig could speed up the process of paying off your student debt. Just remember that the more you spend on debt, the less money you'll have available to invest in the future.

Plan your budget

One of the first and most important steps to getting your debt under control is creating a budget. Here’s hot to do it:

Loking at your bank statements and credit card bills from the past few months.
Determine how much you spend on essentials and non-essentials.
Determine how much you spend on non-essentials.
Once you know where your money is going, develop a plan to cut down on spending.
Put any excess money toward paying down your student loan debt.

Many college students take out multiple federal and private loans, each with its own interest rate and repayment terms. Visit the National Student Loan Data System to get a list of all your loans and an estimate of their monthly payments. After that, create a budget based on your income and goals for the year. Do you want to focus on saving, paying down debt, or both? Once you have a budget set, stick to it as best as possible.

Make extra payments

Student debt can keep people up at night, but making additional payments can greatly help pay off their loans faster. These can include consolidating or refinancing their loans, accelerating repayment terms, or making principal-only payments.

When borrowers send in an extra payment, it is important to inform their loan servicer that the funds should be applied toward the principal balance. This is because, by default, lenders typically apply extra payments toward fees and interest charges before applying them to the principal balance.

Use various payment methods to reduce the overall balance

One of the most effective strategies for reducing your overall balance is called "debt snowballing." This method involves paying off your loans based on their interest rate, starting with the lowest one. Then, once that loan is paid off, the additional payment amounts go toward the next lowest interest-rate loan. This strategy reduces the total amount of interest you pay and gets you out of debt faster. The avalanche method, on the other hand, tackles the highest-interest-rate loan first, which can save more money in the long run.

As you work to pay off your student loans, apply every raise and tax refund toward those payments instead of buying a new iPhone or a bigger house. You might even consider using a money-saving or a change-rounding app to help you save automatically. This will make keeping up your momentum toward a faster student loan payoff easier.

Stay motivated

In some cases, the best way to stay motivated to manage student debt is to surround yourself with people who are on the same page as you. Avoid friends who love to shop and spend money on expensive dinners or drinks at trendy bars. Instead, seek out like-minded individuals focusing on living and spending less than they earn. You can also listen to podcasts on personal finance or join online discussion platforms to find support and encouragement.

You can also use a visual tracker to see your progress toward eliminating your debt. This can provide a sense of accomplishment as you watch your balance decline. You can also set up rewards for yourself as you meet milestones, such as vacation or new clothes.

In the end, while it is a common problem, student loan debt doesn't have to be permanent. With careful budgeting and exploring your options, you can develop a plan to pay it down or even have some of it forgiven. The key is to act now before it gets out of control.

Respond to debt collectors

While managing your student debt, you might encounter situations where debt collectors reach out or even when you're faced with a debt lawsuit. Keep reading to learn how to navigate these situations.

Respond to a debt collection notice with a Debt Validation Letter

If you receive communication from a debt collector, you have the right to request validation of the debt. A Debt Validation Letter is a formal written request that asks the collector to provide evidence that you owe the debt and that they have the legal right to collect it. Here are some things to include in your letter:

Address the letter to the debt collector, including their contact information.
Clearly state that you are requesting validation of the debt.
Include your name, address, and any reference numbers associated with the debt.
Request specific information, such as the original creditor's name, the account number, the amount owed, and a breakdown of any fees or interest.
Send the letter via certified mail with a return receipt to ensure it is received.

Once the debt collector receives your letter, they must provide the requested information. If they cannot validate the debt or do not respond within a specified timeframe, you may not be legally obligated to pay.

To learn more about how a Debt Validation Letter can help you, watch the following video.

Respond to a debt lawsuit

If you are served with a lawsuit related to your student loan debt, don’t ignore it. Doing so can result in a default judgment against you, which could have serious consequences like wage garnishment, liens on your property, etc.

To respond to a debt lawsuit, you'll typically need to file a written Answer with the court. Here are the steps to follow:

Carefully review the lawsuit documents to understand the allegations and claims against you.
Obtain the necessary forms for filing an Answer from the court's website or clerk's office.
Draft a formal Answer that responds to each allegation in the lawsuit. You may admit, deny, or claim insufficient knowledge for each allegation.
Be sure to raise any legal defenses you may have, such as the statute of limitations, improper service, mistaken identity, etc.
File the Answer with the court before deadline, and send a copy to the plaintiff's attorney.

Once you've submitted your Answer, the court will proceed with the lawsuit. It's advisable to consult with an attorney experienced in debt collection lawsuits to ensure you navigate the legal process effectively and protect your rights.

Remember, responding to debt collectors and lawsuits can be complex, so seeking legal advice is often a wise choice. But finding a lawyer can be time-consuming and expensive. SoloSuit empowers you to represent yourself in court and save the hassle and cost of an attorney.

Draft and file your Debt Answer with the help of SoloSuit.

To learn more about how to respond to a debt lawsuit, check out this video:

What is Solo?

Solo makes it easy to resolve debt with debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt. SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

SoloSettle can help you contact your debt collector or creditor and negotiate the debt to settle for less, all online. It simplifies and streamlines the process to settling your debt.

No matter where you find yourself in the debt collection process, Solo is here to help you resolve your debt.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

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