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They say: “Six Common Mistakes People Make With Their Student Loans.” 1 5/5 (1)

There are ways to both cut debt payments—and end up with more money for retirement.

As millennials struggle to repay record levels of student-loan debt, many are making costly mistakes that threaten to undermine their long-term financial security.

For instance, roughly one in four is behind on repayments or in default, which can result in a host of negative consequences, from damaged credit to garnished wages. Meanwhile, many others are struggling to find enough money, after making their loan payments, to save for retirement. Among 401(k) participants with student debt in plans administered by Fidelity Investments, two-thirds say they have reduced or stopped their 401(k) contributions or have taken out a 401(k) loan or hardship withdrawal.

With total college-loan debt in the U.S. more than five times what it was just 20 years ago, “the consequences of managing that debt have never been greater,” says Heather Jarvis, an attorney who teaches financial professionals about student loans.

What follows are six student-loan mistakes people commonly make and how you can avoid them.

MISTAKE NO. 1: Failing to consider income-driven repayment plans

When it comes to government-backed student loans, many people stick with a “standard” repayment plan. This default option requires the borrower to make fixed monthly payments for up to 10 years—an approach that often minimizes the interest the borrower will pay over the life of the loan, in comparison to other payment plans, but maximizes monthly payments.

Some borrowers—particularly those who are cash-strapped—may benefit from an income-driven repayment plan. These plans, the newest of which became available last year, cap student-loan repayments at 10% to 15% of a borrower’s annual discretionary income—an amount that is determined by a formula that includes the borrower’s income and family size, among other factors. Using one, a borrower can free up cash for other long-term financial goals, such as saving for retirement.

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