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Eight Tips to Help Manage the Cost of Student Loans

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College years can be exciting, whether you are just starting your undergraduate degree or have decided to explore your passions with a post-graduate program. It’s easy to get caught up in dreams of boundless potential and forget that at some point, you will have to pay off your education debt. If you’re lucky, grants, scholarships, or family will fully fund your degree. If not, you’re going to need a plan.

According to the latest report by the Joint Economic Committee, Vermont’s average student loan debt is higher than all other states with exception of six other states. 63% of Vermonters now carry an average student loan debt approaching $30,000 (click to tweet). Managing this amount of student debt can present financial challenges as graduates enter the workforce and begin their independent lives. There are some actions that can help reduce student loan debt or manage it in a way that doesn’t create a financial burden.

There are different types of student loans out there, but in general, student loan debt can be deferred until six to nine months after you have graduated. Subsidized federal loans do not accrue interest while they are in deferment while other loans often begin accruing interest immediately, increasing the overall cost of your education with every accrual.

Prevention is always the best medicine, so if you have not set off for your educational adventure quite yet, I advise you to take advantage of all the grants and scholarships you can get your hands on. Another option is to save as much money as possible and accept gifts or loans from family members or friends to help reduce your interest-accruing loan amount.



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Whether you are in the planning stages of your college education or have already started your degree, the following tips may help manage the cost of higher education.

  1. Don’t request income sensitivity unless you absolutely must—most lenders offer graduated loan repayment plans, where you start paying a low monthly amount that increases every two years. This type of repayment plan may help with monthly budgeting now, but you will pay more in interest over the long run. In making this decision, you will want to weigh your short- and long-term objectives carefully.
  2. Begin making payments early—if you are able, start paying down your debt during the deferment period. You can do this by taking on small jobs during the school year and working full time over summer breaks. If you have a subsidized loan, this tactic will help you pay down some of your debt before it even has a chance to accrue interest. Regardless of your loan type, making payments during the deferment period will reduce your overall debt, which will mitigate interest charges.
  3. Loan Forgiveness Options – if you are thinking about a career in public service, such as a teacher, nurse, or working for qualifying non-profits, some or all of your loans may be forgiven. Consider aligning your personal interest and passion with a career that is supported through government loan forgiveness programs.
  4. Roth IRA – if you’re thinking about going back to school and it’s been a while since you’ve sharpened your pencil, don’t overlook your ROTH IRA as a tool to help fund your college tuition to avoid additional loans. If you’ve held your ROTH IRA for 5 years or more, Uncle Sam allows qualified penalty-free withdrawals for college expenses for you as the account holder, or for the account holder’s spouse, children, and grandchildren (and great-grandchildren, too.)
  5. Pay off variable-rate private loans first—ideally, you will have subsidized federal student loans, but if you have a mix of loans, including variable-rate private loans, pay down the private loans first. Private loans with variable interest rates can become larger over the years and tend to have higher overall rates. Paying these off more quickly will reduce your total interest payments.
  6. Don’t spend a lot from day to day—the best way to save is to stop buying. While you’re paying down your debt, think critically about all of your purchases. If you don’t need it—whether it’s a little thing or a big thing—don’t buy it. Steer clear of large ticket purchases altogether but also think about how you spend your pocket change. That latte may not seem like a large purchase but if you buy one a day, the expense will add up. Put your money into the loan for now. You can buy the fun stuff later.
  7. Put all of your resources into the loan—hmmm, what other resources could you divert to your loan? How about the old toys, electronics, or other items that are gathering dust in your closet. Could you sell them online and put the money into your loan? Maybe you don’t need to spend your birthday check, your tax rebate, or the interest payment on that bond your parents bought you when you were a baby? Divert extra cash into paying down your loan now and you can celebrate later with the money you save.
  8. Consolidate or refinance your loans—once you’ve graduated, reassess your school loans. Are you paying on too many individual loans and need to consolidate? Are you getting the best rates on all of your loans? Talk to your credit union or other financial institution to find out if consolidation or refinancing will help reduce your payments and/or loan interest rates.

Your situation will be unique. For example, paying down your student loan while you are in school is a great idea but doesn’t make much sense if you’re barely making enough to get by. Choose the tips that make sense for you and remember that a little sacrifice now can result in large savings in the long run.


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Yvonne Garand - Bio

About Yvonne Garand

Yvonne Garand is our guru for visionary strategy, branding, marketing, business and community development, customer experience, and people development.
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