Getting saddled with student loans has become the new norm, and what you pay depends on the number of loans you take out and the amount borrowed under each. For instance, most students apply for federal loans through the Free Application for Federal Student Aid program, and some look at private loans. However, the Financial Aid Guide published by Maryville University states that tuition for public and private universities can range from $20,000 to $30,000 a year, and to get through this, most students would need a combination of both federal and private loans. More loans equal more interest, which means higher amounts to pay after graduation. This makes student loans a heavy burden to bear, and achieving financial success even harder. In fact, a survey published on Business Insider found that the new standard for financial success for young adults isn’t about being wealthy at all — most people aspire to simply be debt-free.
This is understandable, as this financial burden can be a hindrance to your life choices for years after college. You might avoid making risky decisions at work, or you’ll hold off doing something you love in order to pay your debt. So if all this sounds familiar to you, we’ve outlined some key tips to help you tackle your student loans:
Have a Payment Plan
The first and most vital step is to create a payment plan for yourself. Make a list of your debts, and rank them according to interest.
In this regard, personal finance writer Luke Landes lists two ways you can pay your debt: snowball payments or avalanche payments. Snowball payments involve prioritizing the smallest debt first, giving the rest of your debts minimum payments. Once the lowest debt is finished, add your payments from that to the minimum payment of your next debt. In this way, the snowball method gives you a feeling of accomplishment from seeing results faster. On the other hand, avalanche payments comprise of large payments to the debt with the highest interest rate first, and minimum payments for the rest. Though this method is a little more challenging, it helps you save on interest in the long run, and will eventually help you pay off your debts sooner.
Regardless of the method, a payment plan can also help you achieve one step highlighted by our article on how to ‘Raise Your Credit Score’, which is making payments on time. Taking care of your credit score can benefit you in the long run, as it can make future financial transactions much easier.
Create your budget — and stick to it
Once you’ve landed a job, budgeting your income is vital to help you ensure that you pay your debt on time. This will also help you see where you can cut down on spending, and instead, place that extra money towards your debt payment and even some savings.
Make bi-weekly payments
Switching to bi-weekly payments is one way to trick yourself into paying more — and it won’t even seem like it, until you do the math. For instance, paying $150 bi-weekly for one year (26 weeks) equals $3,900, while paying $300 monthly for one year is $3,600. This method enables you to give 13 months’ worth of payment instead of 12, shaving off time out of your payment schedule and reducing your interest at the same time.
Find a program that suits you
There are plenty of programs that can help you out with your student loans. Most of them, however, only apply for federal loans, such as loan forgiveness, income-based repayment, and loan repayment assistance programs. For those with private loans, Credit Sesame’s Adrian Nazari recommends finding companies with a loan repayment program as an employee benefit, as this can go a long way in clearing your debt.
For many, paying off student loan debts is an important achievement towards long-term financial wellness. Stay motivated, and you’ll rid yourself of your debt faster than you anticipated. After all, the best way out is always through.
Prepared for americasloancompany.com
By Heidi Smith