Graduating with student loan debt has become the norm for college graduates. With the cost of attending a university rising each year, the average Class of 2016 graduate has accumulated almost $40,000 in student loan debt. As a young professional making a full-time income for the first time, finding the motivation to pay off debt can be difficult. Some people struggle to make repayment a priority because of existing credit card debt or options such as deferment or forbearance.
However, one of the first steps to a solid financial future is eliminating debt as quickly as possible — so making education loan repayment a priority is crucial. Education loan debt is part of your debt portfolio, so like your credit cards, you should have a plan in place to pay it off as quickly as possible.
If you are trying to change your mindset when it comes to paying down your student loan debt, here are a few tips to get you started:
4 Tips for Paying Down Your Student Loan Debt:
Get Motivated
It is easy to let your student loans slip your mind and not think about them except for once a month when you send in your payment, but this mindset is not going to get you out of debt faster. Consider what will motivate you to pay off your loans and become debt-free. Calculate the amount of interest you will end up paying if you wait until the end of your loan term to pay it off. Then, calculate the amount you would pay in interest if you paid down your loan a few years earlier. What could you do with the extra money? Find something that inspires you to eliminate your debt faster.
Set Goals
In addition to getting motivated, another tactic you can use to help you stay on track is goal setting. Determine when you would like to have your loans paid off and set a goal to become debt-free by that point. You can also create more short-term goals such as paying off a certain amount per year. Consider using Dave Ramsey’s snowball or avalanche methods to chip away at your debt, one loan at a time. While you are doing that, do not forget to explore whether or not refinancing your student loans could potentially lower the amount of interest that you owe over the life of your loan significantly. Setting goals and coming up with a repayment plan will make you more accountable and disciplined for eliminating your debt.
Develop Your Action Plan
To reach your goals and pay off your debt faster, you will need to go above and beyond the minimum loan payment each month. In order to allocate more money to your student loans, you may need to start budgeting or rewrite your budget to account for a larger monthly loan payment. Try to cut costs where you can, such as consolidating or eliminating services (phone, cable, cell, etc.), cooking more meals at home, or spending less money on clothing and entertainment. If your budget is already tight and you are struggling to find areas to cut back, consider an alternative source of side income to make money in addition to your primary job. You can do freelance work, open an Etsy shop, or even walk dogs in your free time for extra cash to put toward your student loans. If you are interested in the potential for a lower monthly payment or lower interest rates, find out if refinancing or consolidating your student loans through a private lender is a good fit for you. Either way, paying off your student loans should be a priority in every financial decision you make. If you have any excess money after savings and monthly expenses, put it toward paying off your debt — a little goes a long way.
Put Your Education Loans First
To pay off your student loans and pay off your debt as fast as possible, you need to make it a top priority in your life. Instead of ignoring your loans and only paying the minimum each month, refinancing and paying your loans off early will save you money in the long run. Although it may seem difficult and overwhelming at first, with a lot of motivation, goal setting, and a plan, you can make it happen. Check out other tips on the ELFI Knowledge Hub.
