If you’re very invested in achieving a higher education, but may not have the financial backing to support that in the given moment, student loans can be very beneficial. For those of us that have student debt, we know that although it can help us achieve our goals, in the end, you still have to pay it back like any other loan. There are many different types of student loans, along with various reasons for each, and when the time comes, having a plan for paying down your debt is crucial.
Not paying your loans can negatively impact your credit score, professional licenses or driver’s licenses could be suspended, and, ultimately, you wind up paying a great deal more than necessary due to interest and penalty fees. Although student loans can be a great blessing for many who have the drive and ambition to achieve a higher education, make sure that you have a plan or strategy in place for when payment time comes due. Here are a few helpful tips to help you pay down your student debt without any roadblocks.
Try to pay more than the minimum amount each period
Paying more than the minimum required amount can not only help you pay down your debt more quickly, but also help you save money by paying less in the long run. Find additional sources of income to apply to your student loans. Many people end up leveraging the education gained through their loans to gain employment. Finding a second aspect of your life that can supplement your income can help you pay down your student debt. Every dollar matters, especially with compounding debt, or debt that accrues interest.
Take on a second job in order to supplement your income; that job could range from something in a more traditional sense, or perhaps a hobby that you are able to monetize. If you happen to be a homeowner, consider a no-closing-cost refinance, as it has the added benefit of taking advantage of the record-low mortgage rates in addition to having more cash quickly through not paying for closing costs.
Stick to the budget that you make for yourself
A shocking amount of Americans never actually plan a long-term budget in the first place. According to Gallup, “Slightly fewer Americans (30%) prepare a long-term financial plan outlining their savings and investment goals in detail.” Those who do budget their finances, can often find themselves getting carried away. Being exuberant about paying down your debt is a great thing, but creating too tight of a budget and restricting yourself too much can lead to you breaking your budget, and ultimately putting it to the side.
Consider using an online budgeting application, and most importantly, make rules and budgets that you truly believe you can stick to, as budgets only work if you commit to them. You don’t have to cut your costs in half for a budget to be effective, even a simple five or ten percent can help.
Look into student loan forgiveness programs, but don’t rely on them
For those who have student loans and are hoping and praying that they might just magically disappear, that is an option for some select groups. Student loan forgiveness does exist, and for the small number of people who qualify, it can prove greatly beneficial as it can reduce or eliminate some of your debt.
For those who may qualify for it, it really only has upsides, but be careful that you don’t find yourself relying on it to occur. If you start to pay less on your monthly payments, or not follow your budget as tightly, and for whatever reason, you don’t get the forgiveness, you could be digging yourself a deeper hole.
Understand that you might have to make some financial sacrifices
Unfortunately, paying down your student loans may require some sacrifices for some people. There are a bunch of various costs that you can cut down on to make sure that you are slashing your unnecessary expenditures and putting more toward your student debt.
- In an article from Money Under 30, the average American eats out four times a week, and alternatively “If you make just two of these meals at home instead, you save $936 – almost $1,000 a year”.
- For those who might be living in a more expensive apartment, or renting a house with an extra room, consider getting a roommate to greatly reduce your housing costs. Although some may like living alone, finding the right roommate can help you split your rent without causing too many changes to your lifestyle.
- People who live in a more populated city or one with a well-developed infrastructure can consider relying more heavily on public transportation. A study from the American Public Transportation Association showed that “Individuals who ride public transportation instead of driving can save, on average, more than $816 per month.” This comes from eliminating all the costs of owning a personal vehicle, such as fuel, parking, insurance, and more.
Although for many, the benefits of taking out student loans greatly outweigh the negatives, it’s imperative to ensure you have a plan for paying your debts down. Paying more than the required amount can make sure you are reducing the time you have this debt in tandem with saving money over time. Creating a reasonable and affordable budget can allow you to redirect some extra money to your debt and help you rid yourself of it more quickly. For a smaller group of people, student loan forgiveness can be a godsend, but shouldn’t be your only plan should things not work out accordingly. With many forms of debt, financial sacrifices must be made, but understanding where you can easily afford to make them and acting on them accordingly can help you save a great deal of money, and help you pay down your debts with ease.