Today, college graduating classes have an average of roughly $37,000 in student debt per student. Although the standard payment plan for federal student loans has a timeline of 10 years to pay off the debt, the average bachelor’s degree holder takes closer to 21 years to get it all paid off. As the numbers continue to climb, it’s obvious that we need to learn more about how to get student debt squared away earlier.
It’s a challenge to live with debt hanging over your head, especially when most jobs straight out of college don’t pay that much (or, in some cases, anything at all.) However, remember that you managed on a strict budget while you were a college student, and you can continue to be disciplined until the debt is paid off, as well. The quicker you can pay off those debts, the more money you’ll save on interest payments, and the more money you’ll be able to put towards your future instead of your past.
Important Things to Remember About Paying Off Student Debt
Realize that paying interest doesn’t actually reduce your student debt. You’ll never get out of debt until you start taking chunks off of the principle. Strive to shave off that principle a little bit each month. The less principle there is, the less interest you’ll have to pay each month!
You need to set a budget. Most of the anxiety about debts occurs when you’re not sure what you can and cannot spend. Setting a budget will give you a plan for when the student loans will be paid off, and let you know how much wiggle room you have with your paycheck each month.
Read up about your loans. Understand what the grace period is for each of them, and which ones have the highest interest rates.
Avoid bankruptcy. While many people feel the only way out of their student debt is through bankruptcy, it is important to remember that there are lots of programs and strategies that can prevent bankruptcy caused by student debt.
More Tips for Paying off Student Debt Faster
Celebrate landmarks (with inexpensive, reasonable treats, of course). Celebrating certain points will help you remember that you’re working towards a goal, and encourage you to continue in the track you’re going.
Meet with a financial manager. They can help you understand your loans, and whether it would be worthwhile to consolidate or refinance your loans. At the very least, they can help you set a payment goal and stick to it. Sometimes it’s worthwhile to hire someone new as your financial manager, but even if you don’t want to go that route, you can meet with someone at your bank to help you get a plan underway.
Pay as much as you can towards student debts AFTER inflexible expenses (like rent, insurance payments, etc.) and BEFORE flexible ones (like entertainment, clothing, snacks, non-essential groceries like chips or tv dinners).
Look for creative ways to cut spending. This might include biking to work in order to save on gas costs (or you could just improve your gas mileage), couponing, making lunches at home so you never eat out at work… whatever works for you.
Don’t be tempted to just use credit cards to pay it off. Credit cards generate interest too, and oftentimes the interest rate is worse than student loans. You also won’t be eligible for tax breaks and loan forgiveness measures that are sometimes accessible to you.
Ask for what you’re worth. Some of the best ways that you’ll increase your earnings (and therefore your ability to pay off loans) is by asking for a higher starting salary or asking for raises when appropriate. This can be a difficult thing to force yourself to do, but you’re an adult now. You might not always get exactly what you ask for, but if you’ve proven your worth to your employer, you will get something.