For a lot of us, student loans are necessary to get through school. They can help us get the education we need to follow our dreams. Once you’re on the other side of the diploma, however, it can be hard to handle thousands of dollars of debt. If you’re Googling questions like “How to pay off college debt?” we wrote this article just for you.
Take Advantage of Your Grace Period
Most lenders allow a period of time after graduation where you’re not responsible for paying your debts yet. This could be a couple of years or maybe just six months. Most people make the mistake of letting their grace period pass without a single payment. If you want to get a better handle on your debt, begin paying it immediately if possible. Not only will you already be in the habit of putting aside your payment, you’ll likely be several hundred dollars ahead of schedule.
Analyze Your Loans
Regardless of your grace period status, you need to understand the conditions of your loan. You could go the easy route and just pay the minimum payment every month, but doing so could cost you big bucks over the course of your loan. Take a close look at your interest rate and what portion of your payment is going toward the principal.
For example, let’s say you owe $20,000. Your monthly payment may be $200, but because of the high interest rate only $50 per month is going to the loan principal (total). At that rate, it would take you 33.33 years to pay it off. If $150 was going to the principal, you’d have it paid off in 11.11 years. If you’re not sure about the details, don’t be afraid to contact your lender and ask questions.
Keep Living Light
Chances are you got used to the “college lifestyle” while you were in school – Ramen noodles, cheap furniture, and the internet instead of cable. Hopefully, you have a good job now and are making some more money. However, that doesn’t mean it’s time to buy a new surround system and leather chairs. The more places you can cut expenses, the more money you can pay towards your student loan. If you can double or triple your monthly payment you’ll pay off your balance in a fraction of the time and avoid huge amounts of interest.
This isn’t to say you have to survive on Ramen noodles and tap water, of course, but it’s a good idea to stay as cheap as possible. Eat in whenever possible, and you could save as much as $20-40 per meal. Keep your used car for a while longer and you’ll be able to afford a better one later.
Create and Stick to a Budget
Even if you’re living as bare-bones as possible, you can still benefit from creating a detailed budget. This lets you track all of your expenses so you can see where you can cut expenses. Plus, if you watch your finances more carefully, you’ll know exactly how much extra you can add to your payment each month. It’s also a good practice in general and can help you get used to juggling multiple bills. It might seem daunting now, but putting your debt behind you is more than possible.