For many students, a university or college degree comes at the price of a hefty student loan debt. Paying it off becomes a top priority after graduation. And now that you have a stable source of income, the biggest challenge is to pay off the debt as soon as possible, while still covering your needs and saving up for the future. Sounds difficult? These tips will make it easier.
Choose Your Repayment Method
There are no one-size-fits-all methods when repaying your student loan debts, but there are a couple of methods that work for most people. One is to prioritize the debt with the highest interest. Here, you put all your extra money on paying the highest-interest debt first, while making the minimum payments on all debts. Once you pay off that debt, you move on to the debt with the second-highest interest and pay the minimum payment on the loan, plus the amount you were paying on the first debt.
Another method is to prioritize paying off the debt with the lowest balance, regardless of interest rates. You make the minimum payments on all the debts, and pay off the lowest one fist with your extra money. Once that debt has been paid off, you shift to the next lowest balance debt and put the amount you paid to the previous one towards this new debt.
Whichever you choose, add micropayments from the money you unexpectedly found, like the ten-dollar bill you fished out of a coat pocket or the change in the couch cushions. The amount you saved from making small cuts in your monthly budget also goes to the micropayments, whether it’s from a canceled subscription or the amount you saved by using coupons.
There are student loan lenders that offer a discount on interest rates if you allow them to automatically withdraw your payments from your checking account every month. If you get paid on the 15th of each month, for example, you can set up the auto-withdrawal shortly afterward, such as on the 16th or, to account for any possible delays (e.g. a holiday or weekends), on the 17th or 18th. Aside from the discounts, the auto-payment or auto-debit system eliminates late payments, and you would not have to put a reminder on your calendar.
Take Advantage of a Sponsored Retirement Plan
Some companies offer to match a percentage of an employee’s contributions to an employer-sponsored retirement plan. The 401(k) plan, for example, allows you to save and invest a portion of your paycheck into a retirement plan before taxes are taken out. Check with your company offers any of these plans, and ask about the requirements to sign-up for the plan. If you are eligible, you should participate right away and take advantage of the program.
Keep in mind that the 401(k) match alone may not be sufficient to support you after retirement, so you still need to budget for the long-term. However, budgeting for your student loan debt and long-term goals may slow down your repayment, even if you use the best budget apps to assist you with your finance. For now, focus on paying off your student loan debts, and create a long-term budget only after you clear that off. That would also motivate you to deal with your student loan debts ASAP.
Student loan debt is a heavy burden that many alumni bear. To rid yourself of it fast, you need to have an effective approach, and laser focus. Your student loan debt may limit you for now, but reaching for the stars will be a lot easier once you are free of it.