Managing Student Loans: Strategies for Graduates

Do you know that the total student debt in India is over ₹96,847 crore, and the average borrower owes ₹8,95,000? If you are one of the many Indians who have taken student loans, you might be feeling anxious about the amount of money you have to repay and the time it will take to clear your debt.

Student loans can be a major source of stress and frustration for many graduates, as they can affect your credit score, your financial goals, and your quality of life. You may feel like you have no control over your debt or that you are stuck with high-interest rates and long repayment terms.

However, there is hope. In this blog post, we will offer you some practical and effective strategies for student loan management so that you can pay them off faster and smarter. You will learn how to lower your interest rate, reduce your balance, and simplify your repayment process. You will also discover some options for forgiveness or repayment programmes that can help you save money and achieve financial freedom.

At last, we will also discuss how Cube Wealth and Cube Wealth Coaches can help you make informed investment decisions to get higher returns and pay your student loans off even faster.

The strategies we will cover are:

• Refinance your student loans.
• Apply for forgiveness or repayment programmes.
• Make extra payments or use the snowball method.
• Consolidate your student loans.
• Seek professional help or guidance.

By following these strategies, you can take charge of your student loans and turn them from a burden into an opportunity. You can save money, become debt-free, and pursue your dreams. Let’s get started!

Strategy 1: Refinance Your Student Loans

One of the best ways to manage your student loans is to refinance them. Refinancing means that you replace your existing loans with a new loan that has a lower interest rate and/or a shorter repayment term. This can help you lower your EMI (equated monthly instalment), save money on interest, and pay off your debt faster.

Refinancing can be especially beneficial if you have multiple loans with different interest rates and lenders or if you have high-interest private loans. You can consolidate all your loans into one and choose a fixed or floating interest rate that suits your needs. You can also choose a repayment term that matches your financial goals, whether you want to pay off your debt as soon as possible or lower your EMI to free up some cash flow.

However, refinancing also has some drawbacks that you should consider. For instance, if you refinance your government loans with a private lender, you will lose some of the benefits and protections that come with government loans, such as income-based repayment plans, moratorium and grace period options, and forgiveness programmes. You may also have to pay some fees or penalties for refinancing, depending on your lender and your original loan terms.

Therefore, before you decide to refinance your student loans, you should do some research and compare different lenders and offers. You should check your eligibility, your credit score, and your current loan terms. You should also read the fine print and understand the terms and conditions of your new loan. You can use online tools and calculators to estimate how much you can save by refinancing and how it will affect your EMI and total interest.

Strategy 2: Apply For Forgiveness Or Repayment Programmes

Another way to manage your student loans is to apply for forgiveness or repayment programmes. These are schemes offered by the government or some employers that can reduce or eliminate your student loan balance if you meet certain criteria and conditions.

For example, some of the forgiveness or repayment programmes available in India are:

• Education Loan Interest Subsidy Scheme (ELISS): This is a scheme by the Ministry of Education that provides full interest subsidies during the moratorium period for students from economically weaker sections who have taken education loans for technical and professional courses.
• Central Sector Interest Subsidy Scheme (CSIS): This is a scheme by the Ministry of Education that provides full interest subsidies during the moratorium period for students from economically weaker sections who have taken education loans for undergraduate courses.
• Padho Pardesh Scheme: This is a scheme by the Ministry of Minority Affairs that provides interest subsidies during the moratorium period for students from minority communities who have taken education loans for overseas studies.
• Employer-Sponsored Repayment Programs: These are programs offered by some employers that help their employees repay their student loans as part of their compensation or benefits package. For instance, some companies like Flipkart, OYO, and Zomato have launched such programmes for their employees.

However, these programmes also have some limitations and requirements that you should be aware of. For instance, you may have to work in a specific sector or location, maintain a certain academic performance, or repay a certain percentage of your loan before you qualify for these programs. You may also have to pay taxes on the forgiven amount or continue working for your employer for a certain period of time.

Therefore, before you apply for any of these programs, you should check your eligibility, your loan terms, and the application process. You should also read the terms and conditions of the programme and understand the benefits and obligations involved. You can use online portals and resources to learn more about these programs and how to apply for them.

Strategy 3: Make Extra Payments Or Use The Snowball Method

A simple but effective way to manage your student loans is to make extra payments or use the snowball method. These are techniques that can help you pay off your student loans faster and save on interest by paying more than the minimum amount or targeting a specific loan at a time.

For example, some of the ways to make extra payments or use the snowball method are:

• Make Extra Payments: This means that you pay more than the minimum EMI required by your lender whenever you have some extra money or income. This can help you reduce your principal amount and interest and shorten your repayment term. You can make extra payments as often as you want or as a one-time lump-sum payment.
• Use the Snowball Method: This means that you focus on paying off your smallest loan first while making the minimum payments on the rest of your loans. Once you pay off your smallest loan, you move on to the next smallest loan, and so on, until you pay off all your loans. This can help you create momentum and motivation and also help you with debt reduction.

However, these techniques also have some challenges and trade-offs that you should consider. For instance, you may have to sacrifice some of your expenses or savings, find ways to increase your income, make extra payments, or use the snowball method. You may also have to check with your lender if there are any fees or penalties for making extra payments or prepaying your loans.

Therefore, before you decide to make extra payments or use the snowball method, you should do some planning and budgeting. You should calculate how much extra money you can afford to pay and how it will affect your EMI, interest, and repayment term. You should also track your progress and celebrate your achievements.

Strategy 4: Consolidate Your Student Loans

Another option to manage your student loans is to consolidate them. Consolidation means that you combine all your existing loans into one new loan with a single lender, a single EMI, and a single interest rate. This can help you simplify your repayment process and lower your monthly payments.

Consolidation can be particularly helpful if you have multiple loans with different lenders, interest rates, and repayment terms or if you have difficulty keeping track of your payments and deadlines. You can streamline all your loans into one and choose a repayment term that suits your needs. You can also lock in a fixed interest rate that is lower than the weighted average of your original loans.

However, consolidation also has some disadvantages and trade-offs that you should consider. For instance, if you extend your repayment term to lower your EMI, you will end up paying more interest over time. You may also lose some of the benefits and features of your original loans, such as grace periods, moratoriums, or forgiveness programs. You may also have to pay some fees or charges for consolidating your loans, depending on your lender and your original loan terms.

Therefore, before you decide to consolidate your student loans, you should do some analysis and comparison. You should check your eligibility, your credit score, and your current loan terms. You should also read the terms and conditions of your new loan and understand the implications and consequences of consolidating your loans. You can use online tools and calculators to estimate how much you can save by consolidating and how it will affect your EMI, interest, and repayment term.

Strategy 5: Seek Professional Help Or Guidance

The last but not least strategy to manage your student loans is to seek professional help or guidance. This means that you consult an expert or a mentor who can advise you on how to best handle your student loans and provide you with personalised solutions and support.

Professional help or guidance can be very beneficial for managing your student loans, as you can get access to valuable information, insights, and resources that can help you make informed decisions and achieve your financial goals. You can also get emotional support and motivation to help you cope with the stress and challenges of repaying your debt. You can also learn new skills and habits that can help you improve your financial literacy and well-being.

For example, some of the types and sources of professional help or guidance available are:

• Financial Planners: These professionals can help you create a comprehensive and realistic financial plan that covers your income, expenses, savings, investments, and debt. They can help you analyse your financial situation, set your financial goals, and devise strategies to achieve them. They can also help you monitor your progress and adjust your plan as needed.
• Counsellors: These professionals can help you deal with the emotional and psychological aspects of managing your student loans. They can help you overcome your fears, doubts, and anxieties and develop a positive and proactive attitude towards your debt. They can also help you cope with the stress and pressure of repaying your debt and improve your mental health and happiness.
• Coaches: These professionals can help you take action and implement your financial plan. They can help you stay focused, motivated, and accountable and provide you with feedback and guidance. They can also help you overcome any obstacles or challenges that you may face along the way and celebrate your achievements and successes.
• Mentors: These people have successfully managed their own student loans and can share their experiences, tips, and advice with you. They can help you learn from their mistakes and successes and provide you with inspiration and encouragement. They can also connect you with other people or resources that can help you with your student loans.

However, professional help or guidance also has some costs and limitations that you should consider. For instance, you may have to pay some fees or charges for their services, depending on their qualifications, experience, and reputation. You may also have to invest some time and effort to find and work with the right professional for you. You may also have to be open and honest with them and follow their suggestions and recommendations.

How Can Cube Wealth Help?

If you are doing some side hustle (part-time, freelancing, or gig work), you can use the extra income to make larger payments towards your student loans. You can also invest that money to potentially earn a higher return and accelerate your debt repayment.

At Cube Wealth, we provide personalised investment advice and a financial freedom app for graduates who want to manage their student loans faster and smarter. We help you find the best investment options for your goals and risk profile, such as mutual funds, US stocks, P2P lending, and more. We also connect you with proven investment advisors who can guide you on how to lower your interest rate, reduce your balance, and simplify your repayment process.

FAQs Related To Managing Student Loans

1. What are the benefits of managing my student loans faster and smarter?

Managing your student loans faster and smarter can help you save money, improve your credit score, and achieve financial freedom. You can also reduce your stress, increase your confidence, and pursue your dreams.

2. How can I lower my interest rate on my student loans?

One of the ways to lower your interest rate on your student loans is to refinance them with a new loan with a lower interest rate and/or a shorter repayment term. You can also apply for some forgiveness or repayment programmes that can lower or eliminate your interest.

3. How can I reduce my balance on my student loans?

One of the ways to reduce your balance on your student loans is to make extra payments or use the snowball method, which means paying more than the minimum amount or targeting a specific loan at a time. You can also apply for some forgiveness or repayment programmes that can reduce or eliminate your balance.

4. How can I simplify my repayment process for my student loans?

One of the ways to simplify your repayment process on your student loans is to consolidate them into one new loan with a single lender, a single EMI, and a single interest rate. You can also seek professional help or guidance that can help you create and implement a repayment plan.

5. What are some of the forgiveness or repayment programmes available for student loans in India?

Some of the forgiveness or repayment programmes available for student loans in India are the Education Loan Interest Subsidy Scheme (ELISS), the Central Sector Interest Subsidy Scheme (CSIS), the Padho Pardesh Scheme, and Employer-Sponsored Repayment Programmes.

6. What are some of the drawbacks or risks of refinancing, consolidating, or applying for forgiveness or repayment programmes for student loans?

Some of the drawbacks or risks of refinancing, consolidating, or applying for forgiveness or repayment programmes for student loans are losing some of the benefits and protections of your original loans, paying more interest over time, paying fees or penalties, paying taxes on the forgiven amount, or having to meet certain criteria and conditions.

7. How can I find the best refinancing, consolidation, forgiveness, or repayment programme for my student loans?

You can find the best refinancing, consolidation, forgiveness or repayment programme for your student loans by doing some research and comparison, checking your eligibility, your credit score, and your current loan terms, reading the fine print and understanding the terms and conditions, using online tools and calculators, and seeking professional help or guidance.

8. How can I make extra payments or use the snowball method for my student loans?

You can make extra payments or use the snowball method for your student loans by planning and budgeting, calculating how much extra money you can afford to pay and how it will affect your EMI, interest, and repayment term, tracking your progress and celebrating your achievements, and using online tools and calculators.