How to Manage Student Loan Payments

As any current or former college student knows, getting a degree often comes with financial sacrifice. Learn all about managing student loan payments here.

5 min read

As any current or former college student knows, getting your degree often comes with a financial burden. In 2019, roughly 54 percent of college students took on debt, including student loans, in order to pay for their education. Unfortunately, this number continues to climb year after year, leaving many graduates with stress over managing these payments. Plans for paying off loans vary by individual, and how or when you start managing your loans can greatly impact your financial future.

When it comes to managing your student loans, you have the option of paying them off as soon as possible, as opposed to carrying the debt and paying it off more slowly. In many cases, you may have good reasons for paying your loans off sooner rather than later. For one, paying off your loans lowers your debt-to-income ratio. Luckily, student loan debt does not have as great an impact on your credit rating, but paying it off quickly frees up your income for when you want to make a large purchase, such as a car, an apartment, or a house.

Another reason it may be smart to start paying your loans ASAP is to avoid hefty accrued interest. Interest rate is dependent on the type of loan you have, and the longer you take to pay off your loans the more you might owe. In fact, the average federal student loan interest rate is 4.53% for undergraduates and that number can be much higher, creating the potential for thousands of dollars to be paid in interest. Finally, peace of mind and financial security are great reasons to take care of your loan payments quickly. The sooner you are able to manage your loans, the better equipped you are financially for the future.

Despite the many advantages of paying your student loans sooner rather than later, there are instances where you may want to take your time. For one, interest paid on student loans is tax deductible, up to $2,500 per year. Another reason in which you might defer paying your student loans is if you have other debt, such as credit card debt. While student loans can have high interest rates, credit card interest rates can be more than double, so it’s smart to pay the credit card balance down first.

Figuring out how to manage student loans can seem overwhelming, especially if you’re a new student and taking on student loan debt for the first time. Below, we’ve provided five key tips for managing student loans to get you started.

While this may seem simple, many students or graduates are not fully aware of the loans they have in their name. To find information on your Federal Student loans, you can check out the U.S. Department of Education’s database. For private loans, contact your lenders directly. Use this information to understand the payment options offered to you and begin to plan them into your budget.

Most loans offer a grace period, or a time after graduation where you can defer your payments. If deferment is an option in your loan, use this time to fully understand your loan and practice setting aside your monthly payments. By putting aside payments during your grace period, you can pay off a larger chunk once your loan payments start and you’ll have the habit established.

Set aside time to make a monthly budget of your expenses, such as your rent, bills, and other personal expenses. Use a simple spreadsheet or the N26 app, to keep tabs of your earnings and expenses. Each month track every dollar you spend to hold yourself accountable and find areas of improvement within your budget. While budgeting may seem tedious at first, keeping a close eye on your expenses can help you stay on top of your loan payments, while finding ways to save a little extra for the future.

After fully understanding your loans and your financial situation, make a debt repayment plan for yourself. If you have multiple loans, it may be wise to pay off the loans with the highest interest rates first. For example, the debt avalanche is a common method to manage multiple loans. Budget the minimum monthly payment for each loan, plus a little extra for the loan with the highest interest rate. Once the debt with the highest rate is paid off, use all the budgeted money to pay off the other loans.

For some, refinancing their loans may be a great option to obtain a lower interest rate. Refinancing is essentially consolidating your current loans by taking out a new loan to pay off the original. Keep in mind, if you refinance your federal loans, you are no longer eligible for federal programs.

Whether you are paying off student loans or sticking to a budget, keeping organized and focused is important to maintaining your spending habits.


New graduates: Open an N26 account today to get your finances started right. Here's how your N26 account can help:

  • Identify overspending: Identify areas where you can cut back via spending statistics. Without you needing to do anything, the N26 app will tell you how much you're spending on things like bars, restaurants, and subscriptions. You can use this to identify areas where you might be overspending.

  • Put money aside: Spaces helps you to put money aside and stay on track with your goals, so that you aren’t touching the money that you’ll need for your monthly payments and for paying off your loans.

  • Set spending limits: Within the N26 app, you can customize and set your spending and withdrawal limits to stay on top of your daily spending and make sure you never overspend.

The N26 account is offered by Axos Bank®, Member FDIC. N26 Inc. is a service provider of Axos Bank. All deposit accounts of the same ownership and/or vesting held at Axos Bank are combined and insured under the same FDIC Certificate 35546. All deposit accounts through Axos Bank brands are not separately insured by the FDIC from other deposit accounts held with the same ownership and/or vesting at Axos Bank. The N26 Visa® Debit Card is issued by Axos Bank pursuant to a license by Visa U.S.A. Inc. The N26 Visa Debit Card may be used everywhere Visa debit cards are accepted.

By N26

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