College has gotten significantly more expensive over the years. Now, the average student graduates with around $33,000 in debt. There are many students with much more, and with the high interest rates, a good chunk of your income will be going towards these loans for a decade or so. Paying back student loans isn’t a fun process, but it can be made easier with these five tips:
#1. Create a budget
The very first step everyone with student debt (and any debt, for that matter) should take is creating a budget. This is simply a summary of your income and expenses, usually by month. Some people even create weekly or daily budgets, but monthly is probably the most common. By creating a budget, you can get a better idea of your financial health and how you’re doing on paying back student loans. Your expenses include everything from utilities and using to minimum student loan repayments and entertainment. You should consider your future financial goals, as well, like possibly buying a house or having children. With a budget on hand, you can feel more in control and avoid missing debt payments.
#2: Put off big purchases
If you’re relatively fresh off graduation and have landed a job, it’s tempting to start living like a “real” adult. Maybe that means buying a new car, upgrading your housing, and so on. However, it’s a really good to put off larger purchases for at least a year or two, and use your bigger income to pay off chunks of your student debt. The “starving college student” lifestyle has a lot of benefits financially, and it’s much easier to take on when you’re young and don’t have as many obligations. If you are older and still saddled with student debts, it may be harder to sacrifice expenses like travel, but if you really want to get rid of those loans, cutting your spending is the best way to do it.
#3: Make more money
This is easier said than done, but earning extra income is definitely something to consider. If you are already working as hard as you can and simply don’t have time, it’s okay to skip this tip. If you do have time, however, a side hustle is a great way to earn money that you reserve for student loans. These types of gigs include pet-sitting, tutoring, cutting hair, taking photos for special events, selling artwork, and so on. If you have a hobby you believe you’re pretty good at, think about ways to profit off it. In general, the more time and energy you dedicate to your side gig, the more money you’ll make.
#4: Pay more than the required minimum on your loans
The minimum payment is what you are legally required to pay, but if you can, it’s a great idea to pay more. This will speed up the process (many loans have a 10-year repayment plan with minimum payments that reflect that) and ensure the loans aren’t building up interest. Whenever you get extra money in your pocket and you don’t have bills that need to be paid, put that money toward your student loans. Many people like following a twice-monthly payment strategy, so they pay the minimum at the beginning of the month, and then throw extra cash at it at the end of the month. This helps you remember to always pay more than the minimum.
#5: Consider refinancing your loans
Refinancing your loans might be a good way to get a lower interest rate and simplify the paying back student loans process. What is refinancing exactly? You are basically replacing your old loans with a new loan, complete with a new interest rate. You may use this student loan refinancing calculator to have an overview of your refinanced loan. It isn’t the right step for everyone, and not everyone even qualifies for refinancing, but it’s worth looking into. Look at various banks, online lenders, credit unions, and see on to see what they have to offer. If you have a great credit score and want to refinance a federal student loan to a private one, refinancing could be beneficial.
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