Each year more and more students lose their wide-eyed hopefulness for the future as they find themselves facing a mountain of student debt. This puts a damper on things like purchasing a house, a new car, or even starting a business. Thankfully, there are some proven strategies graduates can utilize to pay down their loans without starving first.
From tackling your payments month by month to consolidating student loans, consider this your guide to becoming debt free.
Make a Sound Budget
Tracking how much money goes into and out of your bank account each month can make paying down your student loan that much easier. While you won’t be able to eliminate things like utilities and car payments from your monthly expenses, you will be able to cut down on food costs and spending extra for things like coffee. Even an extra $100 month will go a long way.
Pay Off the High-Interest First
Chances are that you have multiple student loans, or at least a subsidized and unsubsidized ones. Pick out which one generates the most interest over time. It might not be easy, but paying extra each month on a high-interest loan can help you avoid paying thousands extra in interest over the years.
Income Driven Repayment
In many cases, graduates find their monthly payments exceed their monthly budget or stretch it far too thin to even buy groceries. If this happens to be the case for you, take advantage of a federal repayment plan based on your salary. This will eliminate the stress of juggling bills and payments at the same time.
The Round Up Method
Rounding up your required monthly payments can help you pay off a little more each month. For instance, if your payment was $465 you would pay $500 instead. While that doesn’t seem like much, an extra $35 a month adds up to an extra $420 a year.
Make it in Chunks
Paying a little extra each month is great, but taking a huge chunk out of your loans just feels more satisfying. If you happen to get a yearly bonus or your parents send you money for your birthday, resist the urge to spend it on yourself and use it to make a lump sum payment. It isn’t half as fun, but it can shave years off your debt repayment plan.
Rent What You Can Afford
Living within your means usually means cutting back on shopping splurges and going out to eat, but it also means living in a home you can afford. While the freedom your single bedroom apartment affords is nice, it might make more sense to cut down on costs by living with a roommate or moving slightly further out of the city. Creating a budget will help you to know exactly how much you can afford in rent or mortgage.
Consolidation is Always an Option
Many who are faced with an insurmountable amount of debt choose to consolidate their loans into one larger loan. This helps them out each month by offering a lower monthly payment, and often a lower interest rate.
While this option might extend your repayment period, consider how much income it could free up each month. Whether you need the extra cash to pay for groceries or you need to put a little extra towards repayment, it certainly eases the stress of paying off your debt.
Debt can feel defeating, which is why it is important to stay motivated. If your student loans are holding you back from getting your future started, use your dreams as an end goal to make paying down your debt something you actually want to do.
The road to becoming debt free is long and hard, but just think of everything you will be able to do when all is said and done!