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5 WAYS TO PAY DOWN YOUR STUDENT  DEBT

 

Graduation day seemed like it would never come. As a freshman, you saw seniors swaggering about like they owned the place. Then, just a few short years later, it’s finally over! For many seniors facing graduation, though, leaving college isn’t “real” for quite some time.

For these college students, the reality of moving on from college doesn’t set in until a few months later, when they get their first billing statement for their student loans. Seeing a balance of $30,000 or more can make the gravity of adult life hit home in a very real way. It’s difficult to pay down that debt, but it’s possible. Even making just $30,000 per year, you can pay down your loan in three years. There’s no big secret; it’s just a matter of spending less than you make.

1. FIND YOUR MOTIVATION

Getting out of debt is always an instrumental good. People don’t pay off their loans for the fun of it; they do so to get earlier or better access to something else they want.
Finding a motivation is central to making the debt-free project work. Getting rid of your debt will be expensive, and it can be easy to think of the opportunity costs to repayment. With that $30,000, you could buy a luxury car. You could spend a month in Europe. You could buy five expensive coffee drinks every day for a year. Getting motivated to reduce debt will help you avoid the temptation to cheat on your budget.

There are as many motivations as there are graduates. Maybe you want to get debt free to reduce your stress. Maybe you need to boost your credit score before buying a house or car. Maybe you want to reduce your debt so you can start saving for retirement. Finding and focusing on a motivation to get out of debt can make sticking to a debt-free plan easier.

2. CUT YOUR EXPENSES AND PAY OFF MORE

The biggest areas of expense in your budget are likely rent and transportation. Taking big steps, like getting a roommate, moving closer to your job or using public transportation will make big dents in your budget. Saving a few dollars by switching to store brands can help, but you won’t see real progress that way. Live like you’re still in college for a few more years. Eat ramen noodles, share a 10×10 space with another person, and call Chinese takeout and a DVD from the library a romantic dinner date. Defer these savings onto your loan repayment process.

3. OPEN A SAVINGS ACCOUNT FOR COLLEGE STUDENTS

You can’t start paying off your student loans while you’re in college. But you can take proactive steps while you’re in school to make your life easier. Your part-time job might not make a dent in astronomical tuition costs, but it can help you get out of debt faster. Setting up automatic savings account transfers will force you to put away a little bit each month. You can use that once you’re out of school to make a big first payment. It’ll really take the sting out of the debt load.

Make sure to put this money into an account you won’t be tempted to use for other things. The $100 or $200 you put away every month could rapidly disappear through dinners out and concert tickets. Automating savings is a way to keep yourself disciplined and on target.

4. SET UP AUTOMATIC BILL PAY

Your student loan provider is a business, and they’re out to make money. All aspects of their operations, from the materials they send you when you start borrowing to the bills they send you each month, are marketing materials. They’re designed to maximize profit. That’s why their bills make it as easy as possible to pay the minimum and require extra work to pay more than that. They want you to pay the “amount due” every month. It’s more profitable for them that way.

You can get the advantage back by setting up automatic bill pay. When you do, you can designate an amount of your choosing to be paid to the lender every month. You can pay your bill back at your own pace and save some money on overall interest while you’re at it! As a bonus, you can often get around nuisances like “technology fees” with automatic bill payment.

5. CONSOLIDATE AND REFINANCE

College is about the journey, not the destination. If your journey was a longer one than usual, you may have debt from several places. You may have used your credit card to finance your living expenses or taken out unsubsidized loans from private lenders. These variable interest rate loans can really hurt you financially.

It might be time to consider refinancing. You can take a personal loan for all your outstanding debt and consolidate it into one monthly payment. You can lower your interest rate and simplify your financial life at the same time.

This process can also include one-on-one time with a trained financial professional at Sunmark. You can gain advice on budgeting and make a road map to a truly debt-free future. To see if consolidation is right for you, call, click or stop by Sunmark today!