2 Unbiased Experts Reveal the First Commandment of Student Debt Repayment 

Here's how to finally take control of your student debt. 

student debt

Betsy Mayotte lives in the world of student loan advice. She runs a non-profit, freestudentloanadvice.org, and is the president and founder of The Institute of Student Loan Advisors. But even she was shocked when she did her first AMA on reddit and got 1,200 questions in a single day, from anonymous users who knew her only as u/Betsy514.

“It’s sort of telling to me. The fact that so many people are going to internet strangers on a place like Reddit for help with something as serious and impactful as a student loan,” Betsy tells Inverse. “That tells me a story about how desperate borrowers are to look for help.”

The ins and outs of student loans are insanely convoluted — and there aren’t a whole lot of people interested in making it easier. One survey found that 55 percent of borrowers worry about how they’re going to repay their loans, but only 30 percent have actually been given any education about how to do it.

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That’s where Mayotte and other experts, like Mark Kantrowitz, the VP of research and publisher at savingforcollege.com, come in. Inverse spoke to two experts about the best strategies to tackle student debt, and what important pitfalls to avoid while you’re getting started.

student debt, credit cards
Student debt is repaid over decades, not years. Experts advise to treat that debt differently than credit card debt, and attack loans with the highest interest rates first. 

Disclaimer: Everyone’s financial situation is different, so here are just some basic places to start. For specific advice, try r/StudentLoans. It’s about as warm and fuzzy as a community dedicated to paying off a loan can possibly be.

The First Commandment of Debt Repayment

Let’s start with the broad strokes. When it comes to interest rates on student loans, time is not your friend.

“The one cardinal rule that does apply to everybody is that the name of the game is paying the least amount over time,” says Mayotte.

You can do that by making extra payments to reduce how long that loan is in your life. There are two ways to think about making those extra payments: there’s the avalanche, and then there’s the snowball method. If you have money on hand to tackle that loan, target that loan with the highest interest rate, and attack it as swiftly as possible.

That’s the avalanche method, which Kantrowitz also describes on his website.

The alternative is the snowball method. Which means you tackle the smallest loan first, hoping to get a “win” (his word) — which can feel motivating.That might work for smaller types of debt, like credit card debt, but for student loans, he advises to tackle the big loans first.

“Most student loans are large enough where you’re going to be repaying that debt for years and years, not just a few months. There’s a difference between a credit card, that’s paid back over months to years, and a student loan, which is paid back over decades. The avalanche method beats the snowball method for student loans,” he says.

Mayotte adds that the snowball method can be helpful for some people with certain “financial personalities,” but generally speaking, it’s best to get out from under the loan with the highest interest rate as fast as possible.

With that strategy in hand, here are the minutia to keep in mind as you plan your attack.

3. Get Organized

Before you do anything Mayotte explains that everyone dealing with student debt should have these pages bookmarked: The Department of Education, studenloans.gov, and her website freestudentloanadvice.org. You can also bookmark Kantrowitz’s page: savingforcollege.com.

Now, the next thing is to make a spreadsheet of all your loans.

On that spreadsheet include the amount borrowed, when each payment is due, what the interest rate is, and the amount of each monthly payment (assuming you’re planning to repay over 10 years). Also keep track of important contact information, just so it’s on hand.

From there, you can start researching how you plan to tackle the loans with the highest interest rates. Mayotte recommends getting started here, with the government’s student loans repayment estimator.

Then, Mayotte advises that you re-evaluate your plan at least once per year, to make sure you’re still on track. “The same way you check your smoke detectors annually, you should check your repayment strategy.”

2. Be Smart About Consolidation and Refinancing

Consolidating several loans into one loan with one interest rate and one payment each month appears to be blissfully simple. There are reasons to be careful about it.

When you take several loans and consolidate them into one, a new interest rate is calculated. That interest rate is the weighted average of all of your loans put together, and then rounded up by as much as one-eighth of a point. There are a ton of calculators online that can help you figure out exactly what those new payments would look like.

If you’re consolidating to try to reduce a monthly payment into something that works better for you, this can reduce a monthly payment, says Kantrowitz. But if you end up extending your repayment term, you end up paying more over time.

“It may reduce your monthly payment, because when you do a consolidation loan, you’re extending your payment term,” he explains. “You can’t target a payment just to the loan with the highest interest rate. You may be better off making individual payments on the highest interest rate loan and paying it off as quick as you can, because those other loans are going to have very low interest rates,” he adds.

student debt
Both experts caution that online scams usually involve companies that claim to be able to negotiate on your behalf. But even legitimate service providers often can't do anything you can do yourself in 15 minutes or less. 

Then, there’s the refinancing side of things. If you have federal student loans, both Mayotte and Kantrowitz add that in 99 percent of the cases, they advise against refinancing into a private loan program. That’s largely because you lose forgiveness options that are inherent in federal loan programs.

“I only recommend refinancing a federal loan into the private program for people who have a very stable source of income, preferably a household with multiple sources of income and an extremely robust emergency fund — and if their payments are affordable to them now,” Mayotte says.

For people already with private loans, she advises that it’s worth looking into it if you have an interest rate above about six percent. But she cautions that only people who get “sweetheart deals” are people, who are really the cream of the crop, credit wise.

“For people who are looking to refinance to get a better interest rate, I recommend that they take a year or two of on-time payments before they start exploring what they’re eligible for, because it might improve the chances of getting a lower rate,” she says.

1. Don’t Get Scammed

The whole reason Mayotte started her non-profit was because there is a sea of student loan scammers out there. On the r/StudentLoans subreddit, she lists several important ways to identify them. But in general, here are some things to keep in mind.

Asking for a high fee in advance, says Kantrowitz, is a red flag. And if they charge exorbitant fees and claim to be able to negotiate, or guarantee lower payments, he also advises to steer clear. Mayotte adds that by avoiding them, you’re protecting yourself and not missing much anyway:

“I still see many desperate borrowers get victimized by these scams. They’re charging thousands of programs that borrowers can access easily and for free by working directly with their loan servicer.”

There could come a day when student debt actually gets cancelled en masse. But until that happens, there are helpful people out there who are ready to answer questions, and they’ll do it for free.