Student debt can seem like a big black hole especially if you have more than one student loan and have been studying for many years. The key to successfully paying off debt is preparation and planning. Unfortunately, unforeseen things do happen, but if you plan it should be less traumatic. Many people are struggling with paying off their student debt and the US has written off billions of student debt simply because our students cannot pay.
To avoid becoming one of the people that default on their loans, take our advice and follow our steps. If you do so there is no guarantee that you won’t get stuck at some point, but at least you will be prepared and open-minded.
1. Find the right lender for refinancing
Refinancing is a good way to save money on your student debt. When you apply for refinancing you will likely receive lower rates and it will be easier to pay off. It is important to do your research about the different lending companies. You should choose the one that offers the best rates, great service, and has a good reputation amongst other students and lenders. This will ensure that you get the best deal and avoid getting caught in a scam.
2. Pay more than the minimum payment
The easiest way to get ahead with your student debt repayments is to pay more than the minimum amount. In other words, if your payment is $320 per month pay $350 or $400 instead. All the little bits of extra will make a huge difference in the end and you will likely make up months’ worth of payments by simply adding a few dollars every month.
3. Pay more often in smaller amounts
One strategy that seems to work well is paying every second week instead of monthly. How it works is that you divide your payment due in half and pay a half every second week. You end up making 26 payments which amount to 13 months and not 12 months. That means you have won a whole month’s payment and reduced your period of payment. It’s like a bonus check for student debt payments.
4. Find out about interest rate reductions
Lenders often offer opportunities for you to reduce your interest rate. Different companies have different strategies and opportunities and you need to ask about these options. One option that many lenders use is the auto pay option. This means that you give the lender permission to automatically take the payment from your bank account every month. This way they are sure they get their money and you save on interest. It’s a win-win situation.
5. Focus on high-interest rate loans
If you have more than one student loan you should focus on paying off the loan with the highest interest first. This will be the loan that will cost you more over a longer period of time. You should obviously continue paying the minimum amounts on other loans, but any extra cash or income should be put towards paying off the high-interest student debt.
6. Use extra cash to pay off bulk amounts
Another good way to get ahead of your loan repayments is using any big and unexpected cash receipts or windfalls towards making bulk payments to your loans. Money that comes from a thirteenth check, an inheritance, a lotto win, etc. can be used to get you ahead. We know that going on a holiday or buying a new car may be more tempting, but those things will be so much more fun when you don’t have to worry about student debt anymore. So, bite down and keep at it. In a few years, you will be very grateful that you spent that money on your student debt.
7. Don’t extend your repayment period
Extending your repayment period may seem like a good way to get a bit of relief, but it will only make things worse in the long run. In an emergency, this may seem like a good option, but you should be sure that there is no other option. When you extend your repayment period you will end up paying much more than you originally would have. So, instead of saving you money it will cost you more. Try and find an alternative before you go this route.
8. Budget and watch your spending behavior
This is advice for financial planning in general. If you want to ensure that you pay all your student debt in a timely manner you should draw up a budget and follow it as closely as possible. This will reduce the stress of worrying where the money will come from. When you have student debt to pay off, it will be wise to try and curb your expenses. This doesn’t mean that you must stop living and never have fun. It simply means that you should see where you can cut costs and change a few expenditure behaviors that will save you money that can go towards the student debt or at least make it possible to pay the repayment amount every month.
Having student debt is a tough thing. It is like a weight on your shoulders that seem to drag forever. Don’t worry, it won’t last. Getting an education and learning to something that you love is more important than money. So, plan, prepare and go into your student loan with all the right tools in place. This will help you manage the stress and repayments better so it doesn’t take over your life.