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TRENDING BASIC MONEY MANAGEMENT TIPS
08.09.2021 / Borrowing « Back to all articles
Your Guide to Repaying Student Loans
If a college education is part of your life plan, student loans may be unavoidable. The cost of college can be overwhelming for recent graduates as they face a new career and a mountain of debt. The following strategies can help make paying off student loans more manageable.
1. Take Stock of Debt
It's important to know the terms and balance of all your loans. Check websites and paperwork from all loan servicers, documenting the balance owed to each. Then determine if your loan is federal or private, which will affect your repayment possibilities. Investigate whether you qualify for loan forgiveness or income-driven payment options.
2. Create a Plan
There are several plans you can use to pay off your debt. The debt avalanche and debt snowball methods are both effective and easy to follow. Mathematically, the debt avalanche makes the most sense. However, the psychological aspect of the snowball effect is helpful because you'll see faster results.
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Debt avalanche: Focus on paying extra on the highest-interest loan first. Once it's gone, attack the loan with the next highest interest.
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Debt snowball: Start by paying off the lowest-balance debt. Then take those monthly payments and apply them to the loan with the next-lowest balance.
3. Establish a Budget
Once you have an idea of how you're going to attack your debt, you need a budget to help you manage it. Using a zero-based budget helps you with prioritizing expenses. Start with your income, then allocate money to your expenses in order of necessity until you arrive at zero. This allows you to determine where debt should fall on your list of priorities, which can fluctuate from month to month depending on your other needs.
4. Create an Emergency Fund
It seems counterintuitive to put money aside instead of using it to pay down debt, but an emergency fund is one of the best strategies you can use. Unfortunately, life is filled with unexpected scenarios. If you don't have cash set aside to handle them, you are forced to use a high-interest credit card, which just adds to the debt you will have to pay off.
5. Find a Side Hustle
The best way to cut debt is to acquire another source of income. There are lots of opportunities to make some extra money, including driving for a delivery service, doing freelance work, dog walking, babysitting, or selling items online.
6. Cut Spending
You might think there's nothing you can do to spend less, but a little creativity goes a long way. Examples include using a flip phone to avoid a data plan, trading in your car for a less expensive one, and sticking to free entertainment activities for a while, such as hiking or reading.
Student loan debt can feel overwhelming, but by temporarily tightening your belt and following some common-sense strategies, you can pay them off quicker.
Credit Talk
08.09.2021 / Borrowing « Back to all articles
Your Guide to Repaying Student Loans
If a college education is part of your life plan, student loans may be unavoidable. The cost of college can be overwhelming for recent graduates as they face a new career and a mountain of debt. The following strategies can help make paying off student loans more manageable.
1. Take Stock of Debt
It's important to know the terms and balance of all your loans. Check websites and paperwork from all loan servicers, documenting the balance owed to each. Then determine if your loan is federal or private, which will affect your repayment possibilities. Investigate whether you qualify for loan forgiveness or income-driven payment options.
2. Create a Plan
There are several plans you can use to pay off your debt. The debt avalanche and debt snowball methods are both effective and easy to follow. Mathematically, the debt avalanche makes the most sense. However, the psychological aspect of the snowball effect is helpful because you'll see faster results.
-
Debt avalanche: Focus on paying extra on the highest-interest loan first. Once it's gone, attack the loan with the next highest interest.
-
Debt snowball: Start by paying off the lowest-balance debt. Then take those monthly payments and apply them to the loan with the next-lowest balance.
3. Establish a Budget
Once you have an idea of how you're going to attack your debt, you need a budget to help you manage it. Using a zero-based budget helps you with prioritizing expenses. Start with your income, then allocate money to your expenses in order of necessity until you arrive at zero. This allows you to determine where debt should fall on your list of priorities, which can fluctuate from month to month depending on your other needs.
4. Create an Emergency Fund
It seems counterintuitive to put money aside instead of using it to pay down debt, but an emergency fund is one of the best strategies you can use. Unfortunately, life is filled with unexpected scenarios. If you don't have cash set aside to handle them, you are forced to use a high-interest credit card, which just adds to the debt you will have to pay off.
5. Find a Side Hustle
The best way to cut debt is to acquire another source of income. There are lots of opportunities to make some extra money, including driving for a delivery service, doing freelance work, dog walking, babysitting, or selling items online.
6. Cut Spending
You might think there's nothing you can do to spend less, but a little creativity goes a long way. Examples include using a flip phone to avoid a data plan, trading in your car for a less expensive one, and sticking to free entertainment activities for a while, such as hiking or reading.
Student loan debt can feel overwhelming, but by temporarily tightening your belt and following some common-sense strategies, you can pay them off quicker.
