Five Top Tips to Help Pay off Your Student Loan
After years of studying, you are finally a college graduate ready to face the world. This should be an exciting time for you, but that mountain of student loan debt you’re facing takes a lot of the joy out of the moment. It can be downright suffocating, and in fact, student loan payment is one of the biggest challenges that recent college grads face after the completion of their studies. The need to clear the loan and get on with life is almost irresistible, but the difficult part is how to do it. Don’t be daunted! Below, you’ll find some helpful, practical tips to help you on your way.
1. Spend less, Earn more
This should be obvious, but you’d be amazed at how many people overlook the importance of a budget. Never forget that little expenses add up to big numbers, and you can effectively give yourself your first raise by being relentless with your budget, slashing everything you absolutely don’t need in order to give yourself some breathing room.
It’s pretty much a given that entry level jobs won’t pay as much as you feel like you’re worth, so consider augmenting your regular income with some side work. Start your own business, do freelance writing, pick up some gigs on Fiver, and the like. You’d be amazed at how big a difference those kinds of things can make, especially when money is tight, and once you have a regular source of supplemental income, make a deal with yourself. Half for you, half to your loan. Making that deal is easy. Sticking with it takes real discipline.
2. Switch from Monthly payments to Biweekly
This is a good tip as it will enable you pay back less interest because of the shorter time between payments. Another reason is that by the end of the year you would have made an extra monthly payment which can have a high impact on your loan. This will also enable you to reduce your cost of borrowing and be able to pay off your loans faster.
Hand in hand with this, print out a loan amortization table, and cross off each payment as you make it. The amortization table will show you the breakdown of how much of each payment is going toward the interest you owe, and how much toward the principle. When you make each payment, look at the dollar amount for the next month’s principle, and add that amount as an extra payment. In the early part of your loan, it will just be a few dollars, but it will have big impacts in the longer term.
3. Get into Reward Programs
Join the several programs available that reward you for spending money or paying a debt, then use the rewards to plow further into your loan repayment, accelerating the process. Consider using a cash-back credit card to pay your recurring monthly bills. It’s as good as giving yourself a 1-3% (depending on the particulars of the offer) discount each month! Apply all extra cash back directly to your loan. Note that this only works as long as you’re buying essentials. Don’t buy frivolous things, pretending you’re helping yourself out. You can save more by simply not buying them at all.
4. Allocate your payments correctly
When making payments for your monthly bills, pay what you owe, and nothing more. Don’t make extra payments to the light company on the thinking that they’ll just credit your next month’s bill. They will, but the light company isn’t charging you interest, your student loan is, so if you have extra money for something like that, apply it to the thing that’s costing you.
5. Increase your payment gradually
If you’ve taken the advice above to heart, then over time, you’re going to get better at finding paying side work, and of course, you’ll be on the fast track to getting some of those early raises. The same deal applies. Make a deal with yourself that any raises you get, half goes to you, and half goes to the loan. As your side work increases, maintain that deal. Over time, this will see the total amount you’re paying toward your loan each month increase handsomely, and this is the key, because if you just plod along and make the minimum payments, you will guarantee that you’ll pay the maximum possible amount of interest. That’s a losing proposition for you, so don’t do it.
They don’t usually teach the basics of budgeting in college, and that’s a pity, so you’ll have to hone that skill on your own, but the tips above will put you on the right path, and if you apply all of the above consistently, you will save thousands of dollars in interest and pay off your student loans much more quickly than you ever imagined possible.
