Every year, students graduate from college and university with mounds of student loan debt. With the rising cost of tuition, textbooks, and room and board, this debt can amount to thousands, tens of thousands, and even hundreds of thousands of dollars.
Young graduates may face a lot of anxiety while waiting for the six-month grace period to end, and may think to themselves: how am I supposed to pay all this off? Using simple financial tips, you can employ these trusted strategies to manage your student loan debt and make post-grad life a little more enjoyable.
Pay More Than the Minimum
Every month, the loan provider will need you to make a minimum payment to satisfy that month’s loan payment. Usually, loan providers calculate your minimum payment amount based on the amount of loan debt you owe, the length of time you’re willing to be in debt, and your current income.
Sometimes, you receive an unexpected cash windfall, your boss gives you a lucrative raise or bonus, or some other financial fortune appears in your life. If you ever find yourself in a position where you can pay more than the minimum – take advantage of it. This will help reduce the interest that accrues on your loans over time.
Research Loan Forgiveness Options
Certain federal programs, private organizations, and even state and municipal governments offer loan forgiveness in exchange for service, employment, or residence. Professions that are often eligible for loan forgiveness programs include medical professionals, government employees, and teachers, especially in rural areas.
For example, young professionals who work in an eligible government office or nonprofit can apply for the Public Service Loan Forgiveness Program. Eligible full-time teachers who have served for five years or more can apply for the Teacher Student Loan Forgiveness Program.
Stick to Your Budget
It is important that you make your monthly payments on time and in full. A delinquent record can make you ineligible for forgiveness programs and will accrue high interest. If you know how much your loan payments will be each month, find funds within your budget to pay for it.
Take steps to cut costs when finding funds for your monthly loan payments. Cut back on items that are not necessities, such as monthly cable bills, alcohol, or entertainment activities. Subtract all your necessities from your monthly income and allocate the rest for extra things. This will ensure you pay all your bills that month – including your loan debt.
Practice Debt Snowballing
Debt snowballing is a strategy that financial professionals recommend utilizing when managing high debt from multiple sources. If you owe student loan payments to multiple servicers, debt snowballing can help you.
First, order your loans from the smallest amount to the largest. Keep track of each loan’s minimum payments and then each month, make the minimum payment for all your loans except the smallest one. For the smallest loan, pay as much as you can possibly afford to pay each month.
Repeat this strategy every month until you completely pay off the smallest loan. Then, with one less debt, work on the next smallest loan. This cycle will repeat, increasing the amount you can pay off for each debt until you pay off all your loans – and you have peace of mind.