College education in America is pretty expensive, especially if you are thinking of pursuing a course at a private college. A lot of people take student loans to realize their educational goals; however, given the cost of repaying them, it is important to pay them off as quickly as possible. According to https://www.forbes.com, which quotes LendEdu’s annual Student Loan Debt by School by State Report, the total outstanding student debt is a humongous $1.52 trillion, only behind home mortgages in the matter of consumer debt. The average student loan per borrower for the class of 2018 was $28,565 making it difficult for them to pay the monthly installments after providing for essential expenses like rent, food, transportation, and healthcare. The heavy student loan is also one reason why 11.5% of all student loans are in default or 90 days or more delinquent. The impact of the debt can easily affect other aspects of a borrower’s life such as a negative credit score impact, the ability to pursue careers and relationships of choice, purchase a home, and even social life. In short, carrying a large student debt that you are not able to repay can very easily compromise the quality of your life. While it may seem impossible to tackle student debt, you can consider taking some steps that will make it easier to repay the debt and improve your lifestyle.
Make a Budget
Preparing a budget, according to most people, is possibly one of the most boring exercises that you can think of, however, it is essentially the foundation of disciplined financial management that will serve you well as you seek to achieve various financial goals during your lifetime. In its simplest form, a budget monitors your incomes and expenses and assists you to align your financial objectives with your life goals, makes available more money to repay debt, and helps you to pay for important things like a house or a car. Making a budget is easily the simplest way of tracking your money and preventing wastage or overindulgence.
Do Not Just Pay the Minimum Due
Regardless of the type of debt you are carrying, the quickest way of paying it off is to make more than the minimum amount due every month. By doing so, not only will you be able to pay off the loan faster but also save substantially on the interest expense. If you think that paying more than the minimum amount due is impossible, consider using the “debt avalanche” or “debt snowball” methods.
The debt avalanche method: Under this method, you focus on paying off the loans with the highest rates of interest first. You should aim to pay more than the minimum amount due on the loan at the top of the list while continuing to pay the minimum amounts due on the rest of the loans. After you have eliminated the loan with the highest interest, you can use the money available to retire the next loan in the list and so on till you extinguish all the loans one by one.
The debt snowball method: For people who are afraid that they will be unable to tackle the most expensive loans first, this method focuses on paying off the smallest debt first as quickly as possible by making payments over the minimum amount. Then you tackle the next loan and so on until you can take on the biggest loan. By being able to eliminate the smaller loans, it is possible to achieve a sense of accomplishment that will motivate you to pay off the other loans quickly.
For both the methods, it can help if you can allocate any extra income or windfall gains to paying off the debts rather than spending the money for enjoyment. Once, you have been successful in paying off all your debts, you should focus your energies on creating an emergency fund that will take care of three to six months of living expenses and thereafter use the extra money to shore up your retirement funds to make the most optimum use of the money, says a NationaldebtRelief.com financial adviser.
Think About Refinancing the Debt
If you have taken on your student debt at a high rate of interest, it can make sense to have it refinanced at a lower rate. If you have multiple debts, you can also think in terms of taking a debt consolidation loan at a lower rate of interest. Both these methods can potentially save you thousands of dollars for the loan. Make sure you are working with a reputed lender who will not scam you and also resist the temptation to extend the period of the loan as that will simply entail a larger interest expense over the years.
Consider Employment That Makes You Eligible for Loan Forgiveness
There are certain jobs, especially in government agencies or in-demand positions like attorneys, nurses, doctors, etc. in public service that offer loan forgiveness if you work for a certain number of years. If your career goals permit taking up these positions, you can benefit greatly. Additionally, some employers in the private sector have started to include student loan assistance in their package of benefits to decrease the attrition rate and encourage a long-term relationship. Find out if your employer is ready to offer this type of benefit.
Take Up a Second Job
If you can supplement your income with a side hustle, it becomes easier to pay off the student debt. Consider taking up a part-time job in a bar or a restaurant, walk dogs, babysit, or get hired by a company that needs temps in the busy season. The extra money you can pull in to speed up the loan repayment is well worth the sacrifice you make in your social life or for pursuing an interest or hobby.
Student loans serve an extremely valuable purpose – they help you to get the education that is required for realizing your life’s goals. However, keeping them around for a long time is not productive and the burden of repayment can cripple your existence. Every time, your energy for repaying the debt quickly seems to be flagging, think about the life that you can have once you are rid of the debt, and you are sure to regain your sense of purpose.